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THE LEFSETZ LETTER: 2007 Predictions

1. CD sales will continue to tank

Sometime in the next twelve to eighteen months CD sales are going to decline so precipitously as to cause the major labels to rethink their digital strategy. With the iTunes Store no replacement for discs, they’ll be forced to authorize a new method of distribution, just to maintain their bottom lines.

You’ve seen this movie. With film. For fifteen years seers predicted digital would eclipse the old format. This finally happened a year ago, when Konica Minolta exited the camera business and Nikon essentially stopped making film cameras. Same thing is going to happen in the music business, with CDs, it’s just a matter of when. The most interesting point is how the usage of music will change. People shoot MANY MORE digital photos than they ever did film ones. People will own MUCH more music than they did in the physical era. This is good.

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.

2. Rhapsody will still have no traction

When people tell you subscription is the future, they’re right. But it’s not rental. Not for a long long time. Yes, eventually people will have no need to own the product, but that’s closer to ten years out than five, and I’d say more like fifteen. Call it human nature, people want to OWN things, call them their own, have them forever.

Rhapsody IS an excellent service, it’s just that Real doesn’t have enough cash to market it properly. Most people have no idea how it works. If they did, it would make inroads. As for Napster…give me a break. Maybe they can sell the name to the new legalized P2P service!

3. Snocap/MySpace

Irrelevant. Most people don’t want to pay for this crap, and those that do don’t want to pay this MUCH!

4. EMI

Heading for disaster. Either this fiscal year, or next, the financials are going to tank, and then so will the stock.

Gross mismanagement by those in power. Anybody with private equity money and a brain would snatch this company up in a minute. Because in the future, the catalog alone will be worth MANY billions. Because believe me, people will pay for music in the future, we’re in a temporary lull, where those in the know don’t know how to leverage their assets.

5. Apple

Any other CEO would be fired. But canning Steve Jobs would be like firing Tiger Woods from his enterprise. Steve Jobs IS Apple Computer.

Apple will introduce sliver-like notebooks that you’ll be dying to own. They’ll probably introduce a phone in the next ninety days. They’ll continue to have a stranglehold on per track downloads and hand-held music players. BUY STOCK!

6. Rob Stringer

Will not have long enough before the business implodes to save Sony. Looks like BMG is gonna rule this empire in the future.

7. Bono

Will continue to wear those phony sunglasses and try to save the world, sliding into irrelevance all the while. This is a band that needs experimental music released sequentially to regain its cred. But they’re too busy satiating their fortysomething audience, giving them exactly what they want, to matter. It would be like the Beatles releasing "Beatles For Sale" over and over and over again. How about another "Achtung Baby", babies?

8. Live Nation

Don’t focus on the acts, the ticket counts, the grosses, this is a WALL STREET PLAY! Michael Rapino has convinced the money men that he has a way of maximizing revenue. We don’t believe it, we don’t see superstar acts in the pipeline. Then again, if he knocks down TicketMaster fees, and continues to tape and broadcast shows, and sells chazerai to ticket buyers, just maybe he can make the numbers work.

9. XM and Sirius

A merger would be terrible. For you’ve got two completely different cultures and Mel Karmazin would be in control when the deal was done, and all Mel knows is advertising, and that’s the one ace in the hole satellite has, its LACK of advertising.

XM was caught with its pants down by Scott Greenstein and Mel’s star strategy. Actually, the worst mistake the Washington, D.C. company ever made was NOT doing a deal with Howard Stern, that would have killed Sirius once and for all and XM would have emerged triumphant. Instead, XM has now overspent trying to compete with Sirius and its financials suck and there is PRESSURE to merge with Sirius.

Sirius has got the image and the mo.

XM has the better service, both musically and technologically.

The way this fucked up world works expect the two companies to get together and for the resulting company to be like Sirius. And, to paraphrase John Lennon, then the dream would be over.

Two different cultures. Two different incompatible technologies. Does this sound like fertile ground for getting together? But don’t ever forget, Wall Street is in control here, and what the Street wants will happen. And just like with Live Nation, the Street is ignorant.

XM should stay the course. Improve its image. Play the underdog, even though it still leads in subs. I believe it can emerge triumphant. As for Sirius… I don’t know one person who doesn’t complain of dropouts, no matter WHAT they’re airing.

10. Zune

Already dead.

Play by the rules, and you’re history.

Squirt a track to another, if you can FIND another person with a Zune, and it expires in three days, to satiate the RIAA. What if you’re squirting a college lecture? What if you’re squirting the track of an unsigned band? REMEMBER, if you play by the RIAA rules, you’re DOOMED to failure.

Zune will limp along. Then again, Dell killed its DJ.

11. Dell

Will never recover from its bad press.

If your customer service sucks, if your PRODUCT sucks, it’s only a matter of time before someone will establish a Website revealing this fact and your image will be trashed, probably PERMANENTLY! The old paradigm of selling crap via marketing is DEAD!

As for Dell, it is being killed by the commoditization of the PC business. People would rather just go down to Staples and buy an HP off the shelf, having it IMMEDIATELY! Dell will continue to own the corporate sphere, but the company has hit a wall. DON’T BUY THIS STOCK!

12. "American Idol"

Will continue to have solid ratings, which will decline a bit with every season, just like "Survivor". Fox will make a fortune. But the records of these acts…will not rule the sales chart in the future.

13. What WILL sell

It’s 1967. Just before underground FM radio started to gain traction. By 1970 nobody hip was listening to AM. And by ‘73, AOR ruled.

In other words, that SoundScan chart with the albums of acts with hits on the Top Forty??? It’s gonna look completely different in the future. That paradigm won’t die, but it will diminish in domination. It will be about the outside, the cult, the LESS THAN HYPED! Invest in your future by finding an act that can write and play, and then develop it SLOWLY! Say no more than yes. It’ll help your cred. And if you don’t think it’s about cred, you probably haven’t seen the photos of Britney Spears’ pudenda.

14. Soundtrack albums


Oh, now and again one will sell a million. But if you’re a label, offer almost NOTHING as an advance. The movies suck, why should someone want a shitty souvenir? Movies ruled in the nineties and the early part of this century, now they’re a joke. If you’re building a soundtrack with a music supervisor looking to have the new "Footloose", I’m laughing.

15. MTV

Will be less and less about music. The old days are NEVER coming back. And Fuse doesn’t matter. Video’s on the Web now baby.

16. YouTube

What Napster was, before you had a high speed connection and knew the JOYS of excavating rare tracks by your favorite bands.

If YouTube can be legalized, then so can music P2P.

17. "Billboard"

Will get thinner and thinner. Everything in the magazine worth knowing can be distributed on the Web, there’s no reason for this magazine to exist. Expect more conferences as they try to keep the company afloat. Eventually it will just be a Website, but not soon ENOUGH!

18. Managers

More important than they’ve been in fifteen years.

Yes, for the last decade and a half the LABEL was oftentimes the manager. DICTATING the selling of the act. But now almost nobody’s WORKING at the label. The superstar managers are not interested in developing acts, there’s almost no MONEY in it. They’d rather service the superstars and cherry-pick those newbies that break through. The landscape is ripe for a young ‘un to develop new acts and own them. Yes, a new Irving Azoff is in the offing.

19. David Geffen


20. Dr. Dre

Just as powerful as ever.

But hip-hop is not.

Hip-hop will never go away, but it has peaked.


Won’t become any more powerful, but some company doing a similar thing, much more trustworthy because of a more singular/policed voice, will emerge and be the bible. It’s all about filters. They’re coming. Maybe not this year, but soon.

22. Rolling Stone


23. Celebrity news

If your act is a celebrity, you’re fucked. Because celebrities are to be made fun of, they’re entertaining for BEING celebrities, not for anything they’ve done. Just check out or if you doubt me. You don’t see Jim James or Sufjan Stevens on either of those sites, and that’s just the point.

24. Social networking sites

Just the latest manifestation of the AOL chatting phenomenon of ten years ago.

People are isolated, and lonely. They want to connect. The Net is a tool for this. But it’s only a tool. Most of the connecting is done amongst those you already know. Therefore, it’s important to be a member of a group. To get e-mailed tracks, forwarded news, to be kept in the loop. If your group is made up of people you’ve never met who you talk to online, you’re a loser.

25. SXSW

Will continue to be the preeminent circle jerk, promoted by established players and the mainstream media as important even though those truly in touch know that by time it reaches Austin all those with a clue ALREADY KNOW!

26. English music

Still won’t break through, even though much of it is better than American pap.

It’s a cultural thing. In the U.K. there are numerous outlets, and people follow the acts like sports teams. Here there’s just Top Forty, and we don’t want any fops. In other words, there’s no ROOM for English acts on today’s mainstream radio formats, and therefore they can gain no traction. Will someone with dedication try to break great English acts from the ground up, via hard work? I don’t know, but that’s the only way to do it.

27. The blues

Blues rock is coming back. Maybe not this year, but within three. After all, all those kids listening to Zeppelin, they want something NEW to hang their knit caps on. And those acts you hate, Nickelback and Hinder, they’re closer to what’s coming than Justin Timberlake.

28. The Grammys

Will continue to mean less and less.

29. Jimmy Iovine

The days of record execs as stars peaked with Christopher Moltisanti noticing Tommy Mottola outside a New York club in "The Sopranos". Even if he was hot, nobody would care about Jimmy Iovine anymore.

Once again, all the recognition you can get as an exec is from your peers.

30. Coachella and Bonnaroo

Scenes, not the mainstream.

If you think either of these clusterfucks is the future, you’re sadly mistaken.

We’re not in the age of Aquarius, but cacophony. There WILL be a new mainstream, we just don’t know what it is right now. AND, it will not be as dominant as the OLD mainstream. And astride the mainstream will be a bunch of narrowcasted worlds. Where Coachella and Bonnaroo reside.

But no one will tell you the foregoing, because those PROMOTING Coachella and Bonnaroo need to be big swinging dicks, need to be dominant. This constant braggadocio will be undercut by the we’re all in it together ethic of the younger generation. You’ll know progress has been made when the youth squeeze out the old farts at the top, holding back the future, not only in the recorded music sphere, but the live music arena as well. The old rules don’t fit the new world. A kid has an MP3 player, and WANTS MP3s, not copy protected tracks, which he gets from his buddies. This same kid doesn’t understand the TicketMaster fee and the facility fee and all the other bullshit of the live experience, and until ALL of these are gone, we can make no progress.

31. Respect

The key to the future.

And we haven’t had that spirit since 1969.

It’s a more close-knit society. Everybody’s equal on the Web. If you’re not concerned with the experience of your customers, you’re doomed to death. Give people something that touches their souls for a fair price and they’ll give you ALL their money. Rip them off with shit and they’ll tell everybody they know and decimate your enterprise.