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[FOR IMMEDIATE RELEASE. Nashville, TN - USA]
[09 January 2007] [fr. Nashville Tennessean 01 13 05]
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NASHVILLE LABELS GEAR UP TO SEEK DIGITAL FORTUNES



For country music, 99-cent downloads have been a nice marketing tool now, to make money Bill Bennett wasn't trying to make a statement when he gave all 20 Warner Bros. music employees in Nashville iPods for Christmas. But it did send a message.

One, Bennett was going to be a hip boss. Two, he was serious about moving the country record label into the digital era. ''I do understand the opportunities that lie ahead for us in digital music,'' said Bennett, who moved from Los Angeles in November to head up the Nashville record label office.

2004 was the first full year for the music industry to measure sales of songs downloaded from Web sites, which can be played on digital devices such as Apple Computer Inc.'s iPod. Nielsen SoundScan counted 141 million total paid downloads off the major music Web sites, where singles generally go for 99 cents and albums are typically priced at $9.99. The purchases helped push the U.S. music industry over 800 million unit sales of music for the first time since 2000.

Here's what some of Nashville's record label chiefs say about the rising trend of selling songs over the Internet:
  Downloads so far are more important as marketing tools than as revenue-generators, giving song-buyers a way to cheaply sample a new artist and perhaps spurring them to buy the album.
  While downloads are growing, country music still lags other genres, such as rap, in Internet sales numbers.
  Increased buying of music over the Internet is paving the way for new consumer models, such as monthly music subscriptions and online stores that specialize in a genre.

One thing the music labels are not trumpeting is big profits. Margins are thinner on a 99-cent song than on a $15 CD. But not everyone cares. ''I don't think making money is the point yet,'' Bennett said. ''You didn't make money off singles on vinyl, either; it was a marketing tool to sell albums.''

Consider this example: One of the most downloaded songs in any genre last year Save A Horse (Ride A Cowboy) by Warner act Big & Rich. It was the first country song to sell more than 100,000 downloads and tallied 156,858 sales by the end of 2004. Bennett credits the online exposure with helping the duo sell nearly 2 million of its debut album last year without much help from country radio. The song spent only 16 weeks on Billboard magazine's country music chart, which reflects radio airplay, and never cracked the Top 10. ''Their sales exceeded their airplay, and therein lies the future,'' Bennett said.

Two other country singles racked up more than 100,000 paid downloads last year: Gretchen Wilson's Redneck Woman and Brad Paisley's Whiskey Lullaby. ''I think it shows that country listeners are a lot more savvy than they're given credit for,'' said Kenny Alphin, the ''Big'' in Big & Rich. ''As long as people are paying for music, I see nothing negative about it.''

Meanwhile, mass-market adoption of the tools to play downloaded music appears to be quickening with the introduction of smaller and cheaper players. On Tuesday, Apple introduced a $99 ''iPod Shuffle'' a lower-cost version of the most popular player brand and said carmakers such as Volvo, Mercedes and Nissan would start including iPod adapters.

Next challenge: selling albums. For the music industry, one challenge is turning those single-song sales into album sales. EMI CMG Distribution had the 23rd-most downloaded song across all genres from Christian rock band Switchfoot. The band's single Meant to Live sold 189,354 copies online.

But Rich Peluso, president of the Franklin-based music label, said there's an extremely slim profit margin on 99-cent singles. ''You can't make a whole lot of money selling digital tracks,'' Peluso said. ''When you factor in artist royalties, distribution costs, data transfer costs, publishing royalties, credit card fees the margin in track downloading is just not there. ''Where you make money is in albums because you can float those costs across a whole album.''

Bill Kennedy, vice president of sales for Capitol Records Nashville, noted that album downloads are still rare. SoundScan reported only 5.5 million albums downloaded in 2004. ''The one area most people are struggling with is full album sales. (Consumers are) picking off the hits,'' Kennedy said.

But a single's popularity may serve as a barometer of how well an album will sell. He's optimistic about Jamie O'Neal's new album, Brave, which hits shelves March 1, because her first single, Trying to Find Atlantis, is seeing consistent growth in digital sales. ''In my opinion, I think when people hear a lot about someone, they'll go check it out for a dollar,'' Kennedy said. ''If they like it, they'll go out and buy the album.''

More lucrative products. Peluso said serious revenue for record labels probably will come from licensing songs for other digital products, such as mobile phone ring tones and ring tunes. Unlike ring tones, which are reproduced versions of songs, ring tunes are snippets of the original song that phone customers download onto their phones to replace their rings. Such products sell for about $1.50 to $2.50 each.

''We call these 'emerging' in the U.S., but they're starting to mature in Europe and Asia,'' Peluso said. ''Ring tones and ring tunes are a multibillion-dollar business there. Profits were around $200 million in the U.S. in 2004. So that's where the real revenue and the growth is.'' Peluso sees other changes ahead in the digital music world, including a switch from the 99-cents-a-track download to a subscription-based song service such as that offered by Listen.com's Rhapsody service. Subscribers pay a monthly fee of $9.95 per month to listen to all the music they want, with song burning extra.

And he sees more specialization within online retail. EMI CMG is working with Christian retailers to open more online stores selling Christian music exclusively. Lifeway already offers digital downloads on its Web store, and Christianbook.com is about to launch a digital music store of its own. ''We think there's a lot of space for niche genres such as Christian, and country to some degree,'' Peluso said. ''On a Web site that brings people together around a lifestyle, you've got an opportunity to sell them music.''

Warner's Bennett seconds that. ''The idea is, now you have a way to reach people in their homes,'' he said. ''The only way I'm going to be able to communicate with people is if I talk to them where they talk. Find a community, talk to them, eventually you're going to get commerce. Money will follow somewhere down the road.''
[ed. McTrow Ltd. 09 Jan 07. By JEANNE ANNE NAUJECK Staff Writer, Nashville Tennessean]


[c. McTrow Ltd. 09 Jan 07]
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