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As CD sales continue to slide, the record industry is hoping that Christmas Season (biggest sales period of the year) will reverse the trend.

Insiders and analysts believe that if the trend gets any worse major retailers will reduce floorspace dedicated to CD’s in 2008. Greenfield forecasts that retail floor space devoted to CD’s will be cut by at least 20% and possibly 30% in the next year. Retailers will scale back on profitable catalog albums and focus on high profile new releases that will be sold at a discount price.

The record industry core physical goods business (CD’s) is down more than 18% year to date. Tower Records and Musicland collapsed and Trans World (FYE and Wherehouse), the largest music focused retailer said music sales are declined 21% and comprised just 40% of its total business, down from 48% in 2006.

According the NY Post, the record industry needs to sell 150 million albums in 6 weeks to keep pace with 2006’s full year total of 588.2 million albums. Upcoming big releases include Mary J. Blige and Nelly but not enough new releases to reach the goal.

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Internet users in France who download music and films illegally could have their web access shut down by a government body, under a ground-breaking industry agreement backed by Nicolas Sarkozy, the president and reported by The Financial Times.

In a landmark speech Nicolas Sarkozy said: “The rights of authors, the preservation of creativity, the recognition of the rights of each artist, of each performer… was an important commitment of my presidential campaign.

Sarkozy said he feared the internet was becoming a “lawless zone where outlaws can pillage works with abandon or, worse, trade in them in total impunity. And on whose backs? On artists’ backs.”

Three-strikes-and-you-are-out policy means repeat offenders will get a warning threatening to cut off or suspend internet access if they do not stop illegal file-sharing.

This is a step forward in creating a formalized business. It’s about time someone is playing hard ball by removing access to the Internet for the ones being discovered as illegal downloaders. Hopefully China and Russia will follow Sarkozy’s lead and create similar laws that holds their citizens to the highest morals and ethics. According to a report released by IPI, rampant global piracy of recorded music has cost the U.S. $12.5 billion in economic output and 71,060 jobs annually.

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The Arrival (Madison, Alabama) has posted a brand new track,
Put Your Money Where Your Heart Is on their myspace profile. The band was in NYC last week meeting and showcasing for a few indie and major labels. The Arrival formed in the fall of 2004 and recorded their debut EP “Residence Lift” that drew attention from indie labels. Once again, the band released a set of self written, recorded, and produced songs drawing on influences ranging from Justin Timberlake to The All-American Rejects. The band is currently continuing to write and record new music while performing shows.

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Hip Hop producer and artist Jermaine Dupree rants about the current state of music affairs. He believes Apple’s sell-by-the song model is great for consumers and bad for the music business.

Jermaine Dupree says:

These days people just assume that you need a number one single to have a number one album. But look at what’s really happening. Soulja Boy sold almost 4 million singles and only 300,000 albums! We let the consumer have too much of what they want, too soon, and we hurt ourselves. Back in the day when people were excited about a record coming out we’d put out a single to get the ball going and if we sold a lot of singles that was an indication we’d sell a lot of albums. But we’d cut the single off a few weeks before
the album came out to get people to wait and let the excitement build. When I put out Kris Kross we did that. We sold two million singles, then we stopped. Eventually we sold eight million albums!

Did consumer complain? Maybe so. But at what point does any business care when consumer complains about the money? Why do people not care how we – the people who make music – eat? If they just want the single, they gotta get the album. (silicon alley)

The Bottom Line: Jermaine speaks some truth regarding most people assume you need a #1 single to have a #1 album. Jermaine and most music execs and artists do not want to live in the singles business. I do agree that marketing campaigns around the release of albums has lost it’s sexiness. New releases rarely excite consumers and music companies forgot how to tease consumers. In fact, its tough to tease consumers due to illegal downloading. Regardless, sexy marketing campaigns won’t save the singles world. The best solution is new configuration (bundling tracks) and better albums.

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The latest ad supported music experiment comes from the new company Rcrd Lbl which is a joint venture of Downtown Records (Gnarls Barkley, Cold War Kids) and a journalist and entrepreneur who founded the technology blogs Gizmodo and Engadget.

Rcrd Lbl is a cross between a music label and a blog. The releases will be posted on the company’s Web site for free downloading. In order to attract viewers the site will offer eye candy including articles, social-networking features and internet radio stations. The company has signed up 3 big name advertisers  and will rely on multiple revenue streams.

Of course new models will bring new schools of thought. For instance, artists with songs on Rcrd Lbl won’t get a cut of advertising associated with their music instead they will get advances. Advances range from $500 a song for unknown artists and $5,000 for bigger name artists.

Will this experiment work? Who knows, it all comes down the quality of acts and the ability to expose these acts.

Album sales have fallen 14% this year compared with last year, a trend that shows no sign of reversing. Given those “sobering” numbers, Mr. Deutsch says, “if you’re not trying to monetize the experience of sharing music, you’re slowly going out of business.”

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