A Strong 2011 Holiday Season Could Bring Music Business First Positive-Sales Year Since 2004
A Strong 2011 Holiday Season Could Bring Music Business First Positive-Sales Year Since 2004

Coming into Black Friday, year-to-date U.S. album sales were up 3.2%, according to Nielsen SoundScan, leaving music merchandisers cautiously optimistic that this holiday selling season will be strong enough to deliver the industry's first rise in sales since 2004.

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Aside from an impressive release schedule, the major music labels, led by Universal Music Group (UMG), have fought back for the first time in years against the DVD's domination of holiday circulars and prime store real estate, a trend since the mid-2000s.

Beyond the label promotions, retailers and label executives say the industry will benefit from a strong class this holiday season. The slate includes Drake's "Take Care," Justin Bieber's "Under the Mistletoe," Michael Bublé's "Christmas," Susan Boyle's "Someone to Watch Over Me," Coldplay's "Mylo Xyloto," Florence & the Machine's "Ceremonials," Jackie Evancho's "Heavenly Christmas," Lady Antebellum's "Own the Night," Lil Wayne's "Tha Carter IV," Tony Bennett's "Duets II," Jay-Z and Kanye West's "Watch the Throne," Nickelback's "Here and Now," Mary J. Blige's "My Life II . . . The Journey Continues," Rihanna's "Talk That Talk," Daughtry's "Break the Spell" and Taylor Swift's "Speak Now World Tour Live."

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On the other hand, the industry is measuring itself against a fourth quarter last year in which sales rose, particularly on the digital side. One chain merchant points out another challenge: While the total number of music transactions is holding up, customers are spending less this year per sale. He says bad economic news and a wobbly Wall Street has consumers watching their 401k statements and worrying about the future.

"It doesn't matter that they aren't going to rely on their 401k money until years from now," he says. "They see what's happening now and get more conservative with their spending."

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A senior label executive says that he, too, worries about the economy's impact on music sales. "It's hard to get a read on how the holiday selling season will go," he says. "Since the financial crash, everything has been so erratic."

However, the major labels seem prepared for the first time to combat the economy and the DVD industry with aggressive pricing promotions for the holiday season.

Taking a page from the major DVD labels, whose hit movie and catalog promotions since 2005 have all but pushed music to the back of the store during the season, UMG offered 115 titles to merchants at heavily discounted wholesale prices, given in the form of a rebate from actual sales, for featured titles sold from Nov. 20 through Nov. 27.

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For new hit releases, if merchants agreed to feature titles like "Under the Mistletoe" and "Tha Carter IV" for less than $7, they would get a rebate producing a net wholesale price of $6 for each unit sold, provided they also featured the titles prominently in stores and where possible in circulars.

UMG also gave merchants the choice of featuring key catalog titles priced for less than $6, with a rebate that would provide net pricing of $5. For greatest-hits collections, merchants that sold featured titles for less than $5 would get net pricing of about $3.25 per unit sold, sources say.

Likewise, Sony Music Entertainment also designed promotions to combat the DVD industry, although it didn't offer a blanket program like Universal. Rather, Sony provided customized promotions to accounts, with titles that made sense for each merchant. Pricing was similar to the UMG promotion, sources say.

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In addition to UMG and Sony, WEA worked individually with accounts to promote titles. While its discounting strategy on wholesale pricing wasn't as low as the other two, the company did it earlier. Merchants report that if Sony and UMG had come out with their programs sooner than five weeks ago, they could've provided better exposure for the promotions.

Nevertheless, the merchants applaud all efforts and say it shows that labels can put together overall pricing programs that generate excitement for music during the holiday season.

"We see it every year from the video side of the business, and this year the DVD suppliers even seemed to be offering a deeper selection and providing more profit," one music merchandiser says. "Let's hope this year's effort by the music labels will open some eyes and capture real estate for the record labels that wouldn't necessarily be there for them."

Looking at Black Friday sale pricing at various merchants, it seems that for the most part, $6.99 will be the low price for hit titles. If the past is any indication, that's likely to be the floor price through the remainder of the season. The one caveat is that the Army Air Force Exchange Services will have four titles priced at $5 for Black Friday, including Lil Wayne and Lady Antebellum.

Aside from CDs, the other big music sales item appears to be discounted iTunes gift cards: Sam's Club is selling a $100 gift card multi-pack for $79.88, Meijer is selling two $15 gift cards for $24, and Target is offering a $25 iTunes card for $20.

In contrast to the deals being put together for big-box merchants and chain retailers, both major and independent labels outdid themselves with unique exclusives-mainly vinyl-at premium pricing aimed at collectors for Record Store Day indie merchants.

Dubbed once again the "Back to Black Friday" promotion, the offering includes singles boxed sets from the Beatles, Bob Dylan, the Doors, Janis Joplin and Pink Floyd; and album sets from Joplin, Kings of Leon, the Grateful Dead and John Lennon.

Moreover, quantities have been increased this year so that supplies last beyond Black Friday. Chris Brown, VP of marketing at the Bull Moose chain, notes that last year the Lennon singles boxed set had 7,000 units available, and this year the Beatles set will have nearly 16,000 copies available.

Looking at everything that the labels are offering indie merchants for the holiday selling season, "the overall view seems that they have gone for premium packaging offering great quality all the way through from the mastering to the artwork," Brown says. "The labels put a lot of care into creating these boxed sets with gorgeous details in the artwork . . . you can just tell it's been done with love for the artists and the fans."