Record sales were up slightly in 2004, but that doesn't mean the music-business crisis is over. Already this year, sales have dipped more than twelve percent from the start of last year, labels have downgraded their financial expectations and further staff and artist layoffs are expected. Most music executives surveyed by Rolling Stone said it's too early to tell if 2005 will bring recovery or deeper troubles, but they agreed that either way, it's a rough road ahead.
Retail
Sales dropped in four of the first five weeks of 2005, including twenty-eight percent in early January, according to Nielsen SoundScan. Spring and summer releases from major artists such as 50 Cent, Jennifer Lopez, Mariah Carey, System of a Down and Toby Keith should help, but some executives are worried that these won't match last year's first-half blockbusters, like Usher's Confessions and Norah Jones' Feels Like Home.
But sales of music DVDs are solid: Consumers spent around $500 million on them last year, compared with $400 million in 2003. And cell-phone users will soon be able to download hit songs, creating a new revenue stream for the labels and artists. "The health of the entire music industry is strong but currently troubled," says Marc Geiger of the William Morris Agency, who co-founded Lollapalooza. "It's totally fixable -- the question is at what speed it's going to get fixed."
Touring
Finally the mantra that fans have been chanting for years has sunk in with concert promoters: Ticket prices are too high. And there's a showdown brewing over who's to blame. Promoters say the artists are demanding too much money upfront. Agents and managers say their job is to get as much as they can, and they add that ticket sales grossed more last year than any previous year -- it's just that promoters lost money on bad deals and expensive acts. Clear Channel's new global music executive, Michael Rapino, is trying to persuade artists to reduce their guaranteed upfront payments, but some aren't playing along. Sources say a rumored Eminem-50 Cent tour has stalled on the negotiating table.
"The managers got used to those large guarantees," says Kevin Lyman, producer of the twenty-five-dollar-a-ticket Warped Tour. "Promoters are going to have to step up and say, 'No, we're not going to have you out if you're not willing to play the game.'" Megastars are exempt from this policy. U2's ticket prices range from 50 to 170 dollars. Paul McCartney and the Rolling Stones are expected to be on the road this year, and nobody expects them to reduce their guarantees or to lower ticket prices.
The stakes are high: After last year's terrible summer season, Clear Channel laid off as many as a hundred employees and House of Blues put its concert-booking division up for sale. "When you have three heavy hitters [U2, McCartney and the Stones] out on the road, it covers a myriad of other sins," says Randy Phillips, president and chief executive officer of AEG Live. "But I don't think it's healthy if the success of an industry is concentrated on three tours as opposed to thirty tours."
Downloading
The download-singles market is booming, with top artists including Snoop Dogg, Ciara and Green Day selling as many as 50,000 songs a week. But iTunes' ninety-nine-cents-a-song model will face new competition this year from subscription services that allow users to download as much music as they want for a monthly fee. Napster to Go launched in February with a Super Bowl TV spot. The service charges $14.95 a month for access to around a million songs, downloadable to a growing number of portable players (but not to the iPod). RealNetworks and Virgin are expected to launch similar services in coming months.
Although lawsuits against file-sharers have not stemmed the use of services like Kazaa and LimeWire, the record industry is hoping that changes when the U.S. Supreme Court hears the case of Grokster vs. MGM Studios later this month and weighs in on whether file-sharing sites like Grokster and Kazaa can be held accountable for users who trade files illegally.