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Re: [ARSCLIST] CD versus Download was "All hail the analogue revolution..."
Hi Mike:
You are very correct about niche marketing, but please look into licensing fees, mastering costs and
required minimum units from the major companies and you'll see why this is rarely a good business
idea. Do you ever wonder why a Mosaic limited edition is, for instance, 10,000? Because that's what
the major label requires them to pay for in advance. So a product has to have a rather large niche
to work, hence large chunks of catalogs sit out of print. The typical big megaglomerate wants this
kind of licensing deal -- they'll sell you a digital master or if you have a thoroughly-vetted
mastering place, they'll lease you the tapes to make a master. Then they want to do the
manufacturing, typically through their Special Products unit. This requires a minimum-units order
and payment. I think sometimes that price is such that you then have X thousand units to sell and
you can keep all the proceeds. Maybe about a $6-7 per CD net cost, so you can make a 100% profit
assuming you can sell out. So if you can scrape up X thousand customers, it can be profitable. This
definitely works for certain products -- jazz box sets, for example. And now Mosaic is doing
reissues of single Sony/BMG albums, which will probably be successful too. Classic and Speakers
Corner seem able to license LPs rights and sell enough records to stay in business. I think they
might have fewer minimum units and do their own manufacturing.
The key seems to be having niches that are big enough, and populated with customers willing to spend
premium pricing.
By the way, there are very smart bean-counters in the megaglomerates who are very aware of
back-catalog and reissue decisions are generally very sane business decisions for their business
models. To some of our chagrins (including mine), that means a good amount of stuff we'd like to see
in print again won't be. Simply put, we're not a mass market and not even a big enough niche.
-- Tom Fine
----- Original Message -----
From: "Mike Richter" <mrichter@xxxxxxx>
To: <ARSCLIST@xxxxxxxxxxxxxxxx>
Sent: Tuesday, September 26, 2006 10:46 AM
Subject: Re: [ARSCLIST] CD versus Download was "All hail the analogue revolution..."
Tom Fine wrote:
Hi Steven:
I think you should do some research. The record industry is completely youth oriented and baby
boomers do not buy the bulk of the products.
May I suggest that the issue is not majority opinion but sufficient interest. That is, modern
marketing is to the world not to the neighborhood. When one needed to find customers within
walking distance of a shop, percentage interest was paramount. Even today, the major corporations
in any field are concerned about market share.
But when distribution costs are modest and interest is intense among a few, a business can do very
well indeed with a tiny fraction of the world market. So EMI or Sony/BMG may turn up its corporate
nose at the market for a niche product, but a specialist publisher may thrive with the same
customer base.
My primary interest in music is classical vocal. The industry players offer nothing at all to me -
Andrea Boccelli and Renee Fleming are darlings of their product lines and neither has a
significant place in my collection. The relatively few recordings I buy come from labels the
majors do not know at all, such as Opera Rara and Andante (recently and deservedly defunct). The
market leader in classical recordings is a label known to very few of the 'youth', Naxos.
Mike
--
mrichter@xxxxxxx
http://www.mrichter.com/