Business Matters: Hastings Earnings Slip as Music Sales Drop Slightly
Business Matters: Hastings Earnings Slip as Music Sales Drop Slightly

Slightly Better Than Flat Is the New Up!
-- Here's another example of brick-and-mortar retail reaching something of a plateau: Hastings' music sales were up 1.3% in the quarter ended April 30. That's a few percentage points better than the 3% drop in same-store music sales at Trans World's in its quarter ended April 30.

Hastings' numbers are part of a larger recorded music story. According to Nielsen SoundScan, U.S. album sales are up 1% through June 5. CD sales are down just 6.9% -- a huge improvement from the 22.3% deficit at the same time last year. While these relatively positive sales figures are encouraging, album sales and CD sales are down 15.1% and 27.7% over just the last two years, respectively.

Overall, Hastings' numbers were down slightly in the quarter. Revenue dipped to $104.4 million from $108.1 million. Operating income dropped to $1.0 million from $1.5 million in the prior-year period. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) fell to $5.3 million from $5.8 million.

Music sales improved 1.3% from the prior-year period behind a 4.6% improvement in the sale of new CDs. Video games (up 2.5%) and trends (up 11.9%) were also in positive territory while electronic (down 1.9%), movies (down 6.5%) and books (down 9.1%) were in the red.

Music now accounts for a smaller share of Hastings' revenue than it did in years past. In the three most recent fiscal years ending January 31, music's share of revenue was 12%, 13% and 15%. Same-store music sales were down 4.8% in the last fiscal year. But that was an improvement over the 12.6% and 16.3% declines in the two previous fiscal years, respectively.
( Hasting's 10-Q SEC filing)

InGrooves Launches ONE Digital Platform
---- Digital distributor INgrooves's ONE Digital platform has replaced Universal Music Group's existing digital supply chain in North America. The ONE platform now assumes responsibility for all online and mobile deliveries to retailers such as iTunes, Amazon and Verizon. Prior to this launch, INgrooves had been handling digital delivery of UMG's third-party content from labels such as Disney Music Group, Concord Music Group and Fontana. That partnership was announced in September 2008.
( Press release)

Corporate Synergy Report: XM Satellite Broadcasting Clear Channel Stations
-- Starting Wednesday five Clear Channel stations are being broadcast on XM Satellite Radio: Top 40 station KISS-FM (Los Angeles); CHR/Top 40 station Z100 (New York City); adult contemporary station WLTW Lite FM (New York City); country station WSIX (Nashville); and urban station WGCI (Chicago).

Clear Channel claims 237 unique monthly listeners in the 150 U.S. cities through 850 radio stations. Sirius XM - the post-merger company in total - has over 20 million subscribers to its satellite radio service.
( Press release)

Apple's App Approvals Apparently Apportioned Unfairly, Says SIMFY (But Less Alliteratively)
-- Simfy, often called the Spotify of German-speaking Europe, has lodged a formal complaint with Germany's competition authority the "delayed approval" it has encountered in getting its iPad app to market. Said CEO Gerrit Schumann in a statement posted at the company's web site:

"We have always considered Apple an important partner, but it's unacceptable that Apple can regulate the market in this way. The App Store is a key marketplace we use to reach our customers, and Simfy users are rightfully complaining about the lack of this app for the iPad. That is why it was so disappointing and incomprehensible to us that we have apparently been blocked intentionally for months now."

He continued to say the company is irritated but called the delay a "confirmation of our strategy and product development" - the implication being that Apple does not want to compete with Simfy on its own hardware products.
Available only in Germany, Austria and Switzerland, Simfy announced a €10 million (US $14.1 million) round of funding in May. It claims to have exceeded one million registered users in its first year and says its registered user based is growing in the "high double digit percentage ranges."
( Press release)

Can 'Born This Way' Run A Marathon?

-- A CD is an album, but an album is not necessarily a CD. Yes, Lady Gaga's "Born This Way" dropped 85% in its second week of release. No, CD sales did not drop that much, as the title of a Showbiz 411 article by Roger Friedman claimed (the story, with a reference to the title's CD sales, was picked up by the Drudge Report Wednesday evening). CD sales of "Born This Way" dropped "only" 70%.

The main reason for the 85% drop was the 94% drop in digital sales, all the way down to 38,000 units from the record debut week mark of 662,000 units. In a way, it's not a surprise. Sales have become more and more front-loaded in the digital age. Between Amazon's two-day 99-cent promotion (and all the attention it generated) and iTunes preorders, the album was due to have a big second-week fade.

But an 85% is a pretty huge decline any way you slice it. "Born This Way" clearly won the sprint, but a drop that big immediately raises questions about the album's ability to survive a marathon. It went from record-setting debut to #2 digital album of the week behind Death Cab for Cutie's "Codes and Keys" in its debut week and just 3,000 units better than Adele's "21" in its 15th week of release. Then again, Interscope and Universal Music Group will work this album for many months to come. The real story of "Born This Way" will be how it holds on through this year's holiday season, not what it did in the second week of release.
( Showbiz 411)