Jay-Z, Kanye West and their respective labels dissed both the digital and brick-and-mortar account base by giving iTunes an exclusive four-day window on their album Watch the Throne (Roc-a-Fella/Roc Nation/Def Jam) and then giving Best Buy an 11-day exclusive window for the deluxe edition.
Watch the Throne generated first-week U.S. sales of 436,000, the second-largest sales week for an album this year, after Lady Gaga's debut-week sales of 1.1 million for Born This Way, according to Nielsen SoundScan. And second-week sales reached 177,000, for total U.S. sales of 613,000.
But labels and artists who continue to grant exclusive sales windows on big releases do so at the expense of the long-term health of the industry music retail.
While everyone in the industry likes to pretend that file sharing is solely responsible for the industry's downsizing during the last decade, most label executives know that their shortsighted management of retail accounts also played a role in hurting music sales.
The labels favored big boxes who loss-leader music, giving them exclusives and, in some instances, lower wholesale pricing and more cooperative advertising funds than conventional record stores dedicated to music.
It didn't take a genius to see that loss-leader pricing led to unprofitable record stores, which soon turned into shuttered retailers or forced surviving establishments to reduce floor space devoted to music. (Evidently, some label executives didn'ttook a while to realize the full implications of the word "loss" in front of "leader.")
In the end, the industry was left with a smaller retail pipeline, which contributed to declining sales. But the labels don't like to talk about that publicly because that would mean admitting they shot themselves in the foot.
So instead they continuously whine about unauthorized file sharing as the sole culprit behind lost sales. CasualMusic industry observers who don't know better might buy into the labels' rationale. After all, why would any manufacturer of consumer goods deliberately undermine an entire class of retailers devoted solely to their product and then commit the same sin all over again in the digital channel?
But logic is sometimes in short supply in the music industry, especially at a timewhen labelsthere is an unprecedented r rush to chase big first-week sales for new releases. For the short-term thrill of appeasing artists and their managers' egos, they have imperiled the long-term health of the industry.I never met a label president who wouldn't choose immediate sales gratification for a new superstar album over the long-term health of the industry.In the case of Watch the Throne, the idea to give it first to iTunes supposedly originated from the artist, in particular the Jay-Z camp. Island Def Jam president/COO Steve Bartels defended the move. "Today, Internet and digital sales marketing can get the word out," Bartels told Billboard, "efficiently selling a project in advance, eliminate people who steal music and bootleg, and drive the exposure for consumers to visit the stores when it is released" (Billboard, Aug. 20).
But those sStores weren't happy with the iTunes/Best Buy exclusives-they were pissed. Island Def Jam president/COO Steve Bartels can claim credit for being one of a handful of savvy executives who used TV spot marketing to drive traffic into stores for compilation albums in the mid-'90s. Because the ads featured toll-free numbers that consumers could call to order an album, retailers were angry that the labels appeared to be bypassing them. But then they realized that TV marketing was actually driving more fans to their stores to buy the albums.
Bartels is predicting that same phenomenon will happen with the buzz generated by digital sales marketing. But this time, I think he's wrong. ITunes isn't just a great marketing platform-it's the largest retailer of music in the United States.
As for whether the "Watch the Throne" release strategy might serve as a model for other releases, Retail Track just has one question: why would any executive in their right mind knowingly commit the same mistakes they made in the physical marketplace all over again in the digital marketplace? Maybe some are betting that streaming will save the industry and don't have to worry about what happens with people who still want to pay for owning music, whether it's a CD or download. Who knows if streaming will ultimately prove to be the industry's salvation, but having witnessed what went on at brick and mortar retail over the last 15 years, I can safely predict that more strategies like "Watch The Throne Strategy," will hasten the decline of other digital download services, as well as weaken brick-and-mortar further, and in general further reduce sales revenue. Do they really want to remove that safety net?Besides, the "Watch The Throne" CD pipeline may have been shortended, but it wasn't as short as the week turn around time that the Roc Nation and IDJ executives are According to sources, Universal received the CD on July 28 and began shipping CDs to stores on Aug. 1, 11 days a head of the Aug. 12 streetdate and seven days before iTunes got it. Normally, CD manufacturing begins about 21 days before the streetdate , with deliveries to Anderson first beginning about 17 days in front of streetdates.While retailers were angry about the Watch the Throne release strategy (Billboard, Aug. 6), they have done little to dissuade other artists and labels from doing the same. Except, that is, for Trans World Entertainment, which not only got the attention of Universal Music Group but also sales executives at other majors when it refused to take in developing-artist releases from UMG for a few days during the release week of Watch the Throne.
It was the shot heard 'round the (sales) world. Distribution and sales executives say that if large numbers of retailers responded like Trans World did, it would stop all exclusive sales windows dead in their tracks. But retailers don't like to take such stands because they say it would be unfair to customers who may come into their stores looking for such albums. They say it's bad enough that the labels treat fans so poorly by limiting where they can shop for a new release, they don't want to be guilty of the same thing.
But retailers could still respond. The next time a major label or a superstar artist hands iTunes or a big-box retailer an exclusive sales window, they could opt against stocking the album and offer to special order it for their customers from a one-stop.
Do you think that will get the labels' attention?••••