THE LEFSETZ LETTER: E-Book Sales Tank

"E-Book Sales Fall After New Amazon Contracts": http://on.wsj.com/1fXJv3j


Beware of your dream coming true.


For years we've heard that music is undervalued, that people must pay more. But maybe the consumer doesn't want to. That seems to be the case with e-books.


When Amazon launched the Kindle no e-book was over ten bucks. A business burgeoned. Early adopters were ecstatic. But the old guard said they loved paper and the writers and publishers were wary of giving Amazon too much power.


So, after agitating in the press, Amazon gave them some of what they wanted, including the right to set prices.


And then they fell.


Bob Lefsetz, Santa Monica-based industry legend, is the author of the e-mail newsletter, "The Lefsetz Letter". Famous for being beholden to no one, and speaking the truth, Lefsetz addresses the issues that are at the core of the music business: downloading, copy protection, pricing and the music itself.

His intense brilliance captivates readers from Steven Tyler to Rick Nielsen to Bryan Adams to Quincy Jones to music business honchos like Michael Rapino, Randy Phillips, Don Ienner, Cliff Burnstein, Irving Azoff and Tom Freston.

Never boring, always entertaining, Mr. Lefsetz's insights are fueled by his stint as an entertainment business attorney, majordomo of Sanctuary Music's American division and consultancies to major labels.

Bob has been a weekly contributor to CelebrityAccess and Encore since 2001, and we plan many more years of partnership with him. While we here at CelebrityAccess and Encore do not necessarily agree with all of Bob's opinions, we are proud to help share them with you.


Now don't tell me paper is where it's at. If you read the story on backpacks in the "New York Times" you'll see that college students no longer carry books, their courses are online. This is the trend, and to deny the trend is death. ("Backpack Makers Rethink a Student Staple": http://nyti.ms/1Up6jf9)


So CDs are never coming back and track sales are decreasing, -5% for Universal in the last quarter, and streaming adoption is slow.


Why is it slow?


Because tracks are free on YouTube and Apple Music is nearly indecipherable and maybe $9.99 a month is just too much.


Forget about the fans, they'll pay no matter what. But to really succeed you have to get the casual users, the looky-loos. And the larger the barrier, the less they're interested.


Music has completely changed. Used to be tracks were parceled out on the radio with the hope that people would go to the store and buy singles. Now, the track is available instantly online and those who care check it out in droves. Which is how Justin Bieber broke the Spotify record this week. This is a good thing. Monetization comes last in today's marketplace. First comes attention, you want people to check something out, and if it sticks…it's forevermore. Hell, Major Lazer's "Lean On" is still one of Spotify's top tracks. As is One Direction's "Drag Me Down," which held the streaming record before Bieber.


So why is everybody agitating against the new model? Universal Music reported that streaming revenue grew significantly, by 34%, it overcame the decline in physical and downloads, it helped the company's bottom line. But we've got the unwashed uneducated and the marginal protesting that they just can't win in the new world.


Welcome to the twenty first century. That's what I hate about America. No one can move backward, no one can lose. It's like we're dying to become Europe, where jobs are protected. Only they aren't. Industry lays people off in droves and no matter what the musicians say their revenues are not returning, unless they're stars or adjust their model.


We need to get more people paying for streaming.


And first we must expose them to it.


It's hard to get someone to pay $9.99 a month if they don't know what it is, how to use it. And most people still don't. And Apple Music is a bad beginning. I still can't figure it out completely. And if I can't, what about the wannabe?


So freemium must exist. And family plans are a good thing. As is Spotify's reduced student price.


The key is to get people hooked and then raise the price.


Not enough people were hooked on e-books. They're only 24% of the market at Hachette. Writers and publishers will be healthiest when the physical book dies. I know you're screaming, but I'm right. Physical stores and physical books and physical distribution are an antiquated model that wastes money. And the public knows this, which is why it's balking at paying the same price for an e-book as it does for a hardcover, which is oftentimes the case these days.


Which means the value of an album is no longer ten or fifteen dollars. People think that's a rip-off.


But they'll blindly play the same damn track over and over again for decades, putting cash in the pockets of providers under the new model.


This is what I love about the internet, this is what I love about modern life. The old gatekeepers, the people who had control and thought they still did do not. Turns out the public is in control, the public decides what is of value and what it wants to pay for something. And your only hope is to get ahead of people and corral them into a new system. Trying to take away the goodies they already have, that's death.


So, once again, the enemy is not Google or Amazon or Spotify or Apple. Rather, the enemy is you. You refuse to take a risk. You continue to hold on to the old model, as it dies, dies, dies. I guarantee you the people who won in the past won't necessarily win in the future. But if you don't think people are already winning in today's world you don't know Bieber, who would have been a nonstarter without YouTube, you don't know the Weeknd, who started out giving his music away for free, you don't know Diplo, who's used the internet to spread the word on tracks so infectious that he's getting rich.


There's plenty of money to go around.


Please don't hold back the tide of progress.


Take chances.


Laud streaming.


Keep freemium.


Agitate for Apple to simplify its user interface.


Luxuriate in the new golden age.


Or be left behind.


P.S. If you're frustrated that the above WSJ article is behind a paywall you're testimony to the fact that sometimes the price is too high. The WSJ has decided to leave readers behind, which I believe is a mistake. One thing we know for sure, leaving listeners behind is a huge blunder, obscurity is your enemy in today's world, and it's so easy to achieve.

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