Hey, Mr. Music Executive: scrap your preoccupation with CD sales and start looking for ways to help people share, yes share music; focus more on developing and profiting from artists; and forget about subscription services and ad-supported music.
These are the conclusions of James McQuivey, a Forrester analyst, according to a report titled "The End Of The Music Industry As We Know It," issued on Tuesday.
That's a fitting title because the report reads like an obituary. Tower Records, a music mecca for decades, has already closed but McQuivey argues the real deathblow to the industry will come when Wal-Mart Stores, Best Buy, and other large retailers begin scaling back shelf space for CDs.
"This move will permanently signal the end of the music business as it was once known," McQuivey wrote. "From that point on, more music will be sold digitally than on CD, reducing CD sales to just $3.8 billion in 2012."
McQuivey, a former professor at Boston University, tells record executives to cheer up because there are ways to rise from the ashes. He says first, the industry should quit fooling around with music subscriptions and ad-supported models. People want to own their music and downloads have won. Only 7 percent of adults on the Web say they have ever tried a subscription service, according to the report.
The analyst also sent a message to ad-supported music services, such as SpiralFrog and Qtrax. The ad-supported model should stay "on the radio where it belongs," he said in his report. Social networks are better places for selling ads against music, and they also allow users to share songs virally.
McQuivey's finding here was particularly timely. Over the weekend, PaidContent reported that MySpace is in talks with the four top labels about launching a jointly operated, ad-supported music service.
Sharing is vital, according to McQuivey, because it makes new music discovery easier, which the Web was supposed to help with but so far has tanked. In this effort, he sends a special shout out to Slacker, a personal online-radio service.
"The gold medal for 2007 (in music discovery) should have gone to Slacker," McQuivey wrote. "(The) portable device provides instant access to radio-formatted music that can easily convert to a digital download with the click of a button. This model combines the simplicity of the radio experience with the power of music ownership."
When it comes to artists, the labels should focus more broadly on a musician's career, including merchandise and concerts, as well as recordings. He said it's the artists, not the CDs that are the music industry's true product.
In a final note, McQuivey suggests that music artists, who have historically looked down their noses at advertising, had better change. He says the industry should rip a page out of NASCAR's playbook.
"Artists who used to pretend that their platinum album success was really about their "art" will no longer have that luxurious pretense because labels won't sign them unless they agree to a barrage of sponsorship opportunities," McQuivey wrote. "There will eventually come a day when Chips Ahoy will contend with the Keebler Elves over who can be the official cookie of the Taylor Swift world tour."