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THE LEFSETZ LETTER: Why CD Sales Are Tanking

1. The iPod

After you've got an iPod, why do you need a CD?

CDs are voluminous, not only in size, but content. They take up too much space with too much music you don't want to hear. Better off to cherry-pick, just put what you WANT to hear on an iPod. Which holds the equivalent of more CD booklets than you can pack in a suitcase.

As for the sound…

Sure, CDs sound better than MP3s, but CDs sound like crap compared to vinyl. They're cold, they're brittle… Better to hear a facsimile rather than the tinny, compressed, real thing.

2. Radio

The problem facing the sellers of recorded music is more one of EXPOSURE than theft.

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.

Where do you hear the new music? Terrestrial radio may be the dominant format, but it has burned the trust it had with the listener. Everybody now knows radio is about commercials. People used to think the spots were an intrusion, now they think the MUSIC is an intrusion. The deejays are jive, what they play doesn't touch them, people are DONE!

3. MTV

Music video… A format that exploded and then died. Last time I checked, you HEARD music, you didn't SEE it. So there's nowhere to go with music video. Whereas with movies and television shows you can execute endless plots. In music video you can have the bitches and the ho's and the cash. You can have pretty people. You can have special effects. But you've got no soul.

Music video is dead. Except as evidence of what an act looks like.

But that's not enough to sustain a video channel, just ask MTV. Better yet, VH1.

Music video especially in the eighties, and even up through much of the nineties, was a train-wreck that demanded attention. It was a way to break acts. But the public has moved on.

4. People Don't Know What To Buy

Despite the rags and blogs, music is just not a general topic of conversation amongst the public now. Oh sure, young 'uns are still music passionate. But too often the music is just the grease, what you dance to, make love to. As for the oldsters, they're positively lost. They want to buy, but they don't know WHAT to buy.

You used to trust the deejay.

For a minute there you trusted Starbucks.

Until there's a trusted outlet with some mass and momentum, music sales will remain in the dumper. Rather than wine and dine programmers, labels should develop and support new gatekeepers. Who tell people what to buy!

5. Price

CDs are perceived as a rip-off.

Don't tell me how long you practiced, about your talent, the actual recording costs… When you can buy a DVD of a hit movie for a few dollars more than the CD, sometimes for even the same price, record companies appear to be ripping you off.

6. Lack Of Hit Acts

Most of the country thinks white gone black Justin Timberlake is a joke, not that they have to pay attention, in today's world you can AVOID everything you don't like.

A hit act is one that demands attention, that you want to focus on. There aren't enough of these. And those that are around don't live up to the hype.

7. Availability

There are fewer stores selling fewer CDs. This is a recipe for more sales?


1. Give Up On The CD

But this can only be done if there's a viable alternative. The iTunes Music Store is not this.

The paradigm has shifted, more people are going to own more music. They already DO! To try to carry over the CD model to the file world is ridiculous.

Sell boatloads of material at a cheap price, it's your only alternative.

DRM? Interoperability? iTMS dominance? All sideshows. The public steals and IM's online and rips friends' CDs. They're getting the music, it's just that no one's GETTING PAID! Monetize reality. Make it easy and cheap for people to buy music online. Everything you can eat, without DRM, as MP3s, for a small amount a month. Let people know you won't sue them, that they've got no liability, and they'll sign up.

2. Jawbone Terrestrial Radio

Top Forty's got to play more music, or labels should move on to Net and satellite. Don't increase the Net license fees, DROP THEM! And do cross-promotions with satellite. You need to know where in the food chain to charge. The labels, the rights holders, want all their money up front. But they're killing their business. You've got to play for the future, you've got to play the long game.

3. Make Peace With The Customer

Lawsuits must end. The adversary relationship between companies and consumers must end. The labels should do a mea culpa, and give away some music for FREE as payment.

Yup, an RIAA site where you can download, FOR FREE, a bunch of tracks a week. Charge in the long run, not immediately.

4. Embrace The Indie Stores

They survive, they're loyal. Boost them because that's where acts develop. I think the CD is dying a quick death, but until it does, play with these guys, not Best Buy. Hell, Best Buy DEVALUED music. Do you buy a Lexus at 7-11? Do you buy Cartier at Costco? Why should someone think the act is worth anything if it's whored out all over TV like some commercial product, and sold with no atmosphere at the big box retailer. Hell, there's no ENVIRONMENT!



We're never going back to the past. Major labels will no longer be dominant, there will be fewer blockbusters, niche will rule.

But you can get rich by aggregating the niches. This is the majors' way out, not that they're taking it on their road to consolidation, to cutting costs.

Not that you need to combine niches. One act can be its own business now. It has its own showroom on the Net, its Website and MySpace page, and it sells at its gigs. The niche doesn't need the major, never mind Top Forty radio or MTV.

There's a larger demand for recorded music than ever before. More people already own more music than ever before. So why are the powers that be crying? Because they never owned up to the changed reality.

You've got to establish trust with the consumer, a bond. You've got to nurture the relationship. You've got to let them pull rather than pushing. You've got to let them do the work for you.

But this is too slow, too organic for the oldsters, who think selling music is no different from moving appliances.

It costs essentially nothing to duplicate a file. Own that, don't call it theft. To do so is to try to charge for a new Magic Slate every time somebody lifts the plastic to create a new picture.

Demonstrate that you understand the new reality, build bridges to the consumer, don't have contempt for him. He's got computer savvy you'll NEVER have. And he's using this computer savvy to ruin your business model.