Major label executives appeared downbeat Wednesday morning during a morning roundtable in Los Angeles, thanks to continued sales declines in the physical sector.
The panel, held at Music 2.0 in West Hollywood, featured executives from Warner Music Group, EMI, Universal Music Group, and Hollywood Records, among others. The discussion focused heavily on a recording industry business model that now appears to be entering a very dire period. “There is a lot of concern about CD sales dropping off a cliff at some point, and digital potentially not being able to grow fast enough to offset that,” said David Ring, a top executive at Universal Music eLabs. Referring to digital, Ring noted that “we do have a business that we didn’t have four years ago,” though he also pointed out that digital sales are grabbing an increased percentage of a shrinking pie.
Warner Music Group digital executive George White echoed some of that sentiment by pointing to a “more rapid decline in physical sales than we anticipated,” though he also appeared optimistic on digital growth trajectories. Others were also less-than-exuberant, including Ted Mico of Capitol Records, a company that is now in the throes of a tough restructuring. “Piracy has a face,” Mico said. “It’s people packing up offices in boxes,” a comment that supports earlier information pointing to broad layoffs at the company.
Despite digital gains, the underlying fundamentals remain grim for labels. Years into a digital disruption, labels are still struggling with a business that reaps limited returns from broader artist investments. In a previous era, labels gladly financed marketing initiatives for artists – including tour support – without receiving direct returns from areas outside of the CD. That approach is now becoming a critical problem, though a clear plan has not emerged to broaden the business. “We’re going to have to get good at all of these ancillary revenue streams and see what works,” said Ring, while Ken Bunt of Hollywood Records pointed to a far broader approach that included “touring, merchandise, mobile, DVDs,” and a large host of other areas. “We could monetize file-sharing tomorrow, but it would just be one small part of the puzzle,” Bunt said.