Gales Network • Brand building from the inside out

The Gales Network: Focused brand management and business development

8 May 2007

Digital NARM 2007

Big Ideas Topic:
The Big Idea behind the first Digital NARM Convention (May 1-2, 2007 Chicago, IL) is that traditional retail remains an essential part of the music industry landscape. Far from dying, it is evolving and must be nurtured to grow stronger.

At Issue:
Researchers agree that total consumption of music is up (BigChampagne: approximately one billion downloads monthly). Transforming that consumption into profitable commerce is the challenge for both content owners and retailers of all stripes. A number of reasons are cited for recent dramatic declines in entertainment retail revenues; none more prominent or vilified than illegal downloads. For content owners, the landscape is flooding daily with new sales options for music and diluting the focus on long time retail relationships. Will traditional retail survive this transition or give up on music entirely?

Big Ideas View:
Robust bricks and mortar retail is crucial to a thriving music entertainment industry. It remains a powerful and effective venue for showcasing music products. The key to a healthy retail environment is the convergence of physical and digital sales. To tap into the new and ever-morphing paradigm of consumer sales, both content owners and retailers must demonstrate a willingness to experiment, innovate and make mistakes.

Retailers: Your brand is more important than ever. It is what you stand for and what your customer identifies with. No brand authenticity, hello Limewire. Try new sales channel partnerships such as mobile operators (research estimates run as high as one billion music-capable mobile phones coming on line next year), exploit online catalog sales in partnership with a successful digital brand (i.e. Best Buy is working with Rhapsody, Tower Japan with Napster, Mix & Burn with Borders and FYE.) Most of all, mine your own direct customer relationships to leverage the power of targeted consumer profiles. Encourage a flow of a broad range of configuration options and price points from content owners and aggressively market them to your customers. Consider in-store kiosks to download front line and catalog tracks, SD cards for cell phones and more. These strategies have the potential to improve your revenues and differentiate your Brand.

Content Owners: Traditional music retailers have valuable consumer brand equity; you don’t want to give up this historical ground. If you transfer marketing dollars and support from traditional retail, failure is likely for many if not most, as consumers will continue to migrate to ‘free’ over ‘paid’. Investigate new sales opportunities and partnerships while strongly supporting long-term retail partners in their quest to evolve to meet the radically changed consumer environment. Establish a broad range of configuration options and price points to retail (it’s not just a CD world anymore) that utilize unreleased tracks, photo shoot out-takes, unused video footage as added value and a hedge against piracy. Provide artists to retail for on- and off-line events. Experiment with new formats.

Summary: Consumers want value with ease more than ever before: what they want, when they want it, and at a price that feels fair. When all the stakeholders collectively find that sweet spot, revenue will grow, piracy will languish and the new Music Business will win.

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The Big Ideas Report separates the real issues (Big Ideas) from the noise, so that it’s possible to move forward with confidence or simply converse intelligently with others. We identify issues that have a material impact on your business, define them succinctly and suggest a position, so you can get going. Part fact, part opinion, part alchemy, that’s The Big Ideas Report.