Global Markets Under Serious Pressure; More Questions Surround Music
The now-global financial crisis dragged exchanges across Asia, Europe, and the United States on Monday, despite the recent passage of a massive bailout package. During a roller-coaster day, the Dow Jones Industrial Average tanked more than 800 points, a one-day record that dragged the needle below 10,000. The crater then prompted a late-day buying rally, leaving the exchange at a more mild, 370-point drop by the bell.
The US Treasury is now moving forward with an approved rescue package that exceeds $700 billion, though expectations of a successful resolution appeared baked into pre-Monday valuations. Instead of gains, the market collectively expressed doubt that the bailout would reinvigorate markets, and indeed, some time will be required to unfreeze a tightening credit climate.
Music-related stocks were battered by the broader malaise, though the late-stage rally mitigated the declines. Warner Music Group (WMG) slipped to $6.09 before recovering to $6.61, down 4.21 percent. Apple (AAPL) had its ups and downs, dropping to a 52-week low of $87.54 before landing at $98.14, up 1.1 percent. Sirius XM Radio (SIRI) continued to suffer, ending at just 50-cents.
Ahead of US-based trading on Monday, European and Asian indices offered a dreary prelude to the profound intraday drop. Banking bailouts, stepped-up deposit guarantees and aggressive interventions are now part of the European reality, a serious confidence drain for investors. Asian markets also stumbled, and Russia actually closed its markets prematurely.
The broader tale of woe is rippling into the music industry, though the exact fallout remains difficult to predict. Issues related to consumer confidence undoubtedly impact the CD, already a tanking commodity. Music-focused entrepreneurs may also be forced to scrape together funding from sources outside of Sand Hill, including benevolent angels and even credit cards. The new reality could thin the field and slow the entrance of startups, though troubled markets are frequently weathered by profitable, financially-disciplined companies.
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We Have Our Own Coalition, Thank You: British Stars Unite
Artists want more control over their digital careers, and now, they are banding together to gain that control. Over the weekend, a coalition of British artists announced the formation of the Featured Artists Coalition, a growing group that includes Radiohead, Robbie Williams, Billy Bragg, Craig David, Sia, Travis, and Kaiser Chiefs. "We want all artists to have more control of their music and a much fairer share of the profits it generates in the digital age," the group declared on
featuredartistscoalition.com. "We speak with one voice to help artists strike a new bargain with record companies, digital distributors and others, and are campaigning for specific changes."
The official coming out happened at the In the City Conference in Manchester. The group is aiming to create legislative changes to give artists greater ownership of their works and build more transparent negotiation processes with labels and other business partners.
Those objectives transcend digital distribution and emerging formats, though artists carry far more clout in the current era. Radiohead is leading the charge into independent format distribution and control, though the band carried considerable brand equity into their initiatives. That always helps, though unknown artists can now cultivate targeted audiences, sell content directly, and develop revenue streams without the assistance of labels, part of a game-changing disruption that affects artists at all levels.
Second Life Lessons: Underestimate Niche at Your Peril
September roiled the recording industry, and tightening consumer wallets could spell a vicious fourth quarter. That is part of a bigger, multi-year slide for major labels, a downward spiral driven by a tanking CD.
But not everyone is getting the doom-and-gloom memo, including EMI Music senior vice president of Digital Strategy Cory Ondrejka. During a late-day keynote at Digital Music Forum West in Hollywood, Second Life cofounder Ondrejka offered a snappy, smart, and optimistic outlook for the beleaguered label. Tossing words and phrases likecollaborative filtering , community formation, entrepreneurship, and crowdsourcing, the incoming brain focused on niche audiences, microtargeting, and rapid responses to consumer needs. "Underestimate niche at your peril," Ondrejka urged.
But the coveted niche exists within a very, very large potential audience. "We basically have access to half of the earth," Ondrejka said, pointing to collective internet and mobile penetration rates that easily surpass three billion (1.2 billion internet users, 3.2 billion mobile users). "We have billions of fans, and zero marginal costs."
If Ondrejka at times seemed like a digital dreamer, he also realistically pointed to a business model and cost structure that has been focused on big hits, big artists, and super-sized marketing campaigns. But Ondrejka also placed emphasis on Long Tail theories throughout, and was clearly motivated to energize more focused audiences. "Those artists way out on the curve are valuable, and this can be scary in a hit-driven world," Ondrejka said. "The top of the curve is dropping faster than the market as a whole. That is the curve flattening out, this is the Long Tail that Chris Anderson talks about. The niche actually monetizes better, and if you doubt that, you should probably go check out eBay, or Google, or Second Life for that matter."
Of course, label revenues are clearly declining, though Ondrejka pointed to massive increases in music consumption, across both free and paid channels. "This is actually a really great time, in some ways this is the best time ever to be in music," Ondrejka said.
Ondrejka was recruited by Douglas Merrill, an ex-Googler and EMI newbie who shares a similar digital brilliance and optimism. The combination is certainly refreshing, though largely incongruent with technophobic strategies like file-sharing lawsuits and arduous licensing approaches. Those touchy topics were left untouched, though the broader question is whether Merrill and Ondrejka can quickly solve an urgent monetization riddle.
Report by publisher Paul Resnikoff in Los Angeles.
[all articles by Digital Music News]