Execs hope Eminem, Net can revive music industry

By | January 21, 2002 at 12:00 AM

Can bad-boy rapper Eminem succeed where Mariah Carey spectacularly failed last year – score a hit record to revive the down-and-out music industry? That is the burning question on the lips of music business honchos converging on Midem, the industry’s annual get-together on the French Riviera this weekend.

Executives will be praying for fortune to smile on a line-up of superstar releases including Eminem, Christina Aguilera and the King, Elvis Presley, to resuscitate an industry reeling from 2001, the worst year on record.

Depending on their success, the $40 billion global music industry could shrink another three percent this year as consumers divert spending in a sagging economy, rattling the world’s dominant five – Universal, Sony Music, EMI, Warner Music and BMG.

“The music industry needs to re-invent itself. By 2005, we will be looking at a very different music industry than today,” said Helen Snell, media analyst at Dutch bank ABN Amro.

Aside from frantic cost cutting and management overhauls, many are betting on the much-maligned Internet as a saviour even as they continue the fight against illicit online music.

Music executives hope nascent online sales will help drive the next wave of growth, as CDs did in the early 1990s, replacing cassette and vinyl music collections.

However, executives concede it could be years before online sales to take off. Merrill Lynch forecasts that total sales will remain at low-single digit growth before rising in 2005 to around 6.5 percent when noticeable online revenues kick in.

“The task in 2002 is to clear some space so the legitimate online services can begin to operate,” said Jay Berman, CEO of the music industry’s trade body, the IFPI. However, he was unsure whether they would have any real impact this year.


The major music labels have a new weapon in their arsenal this year: their own online music services MusicNet and Pressplay. But the buzz at Midem’s digital music sister conference MidemNet will be on how they are progressing.

Reaction has been muted so far. Since the launch last month, music fans have aired complaints on Internet message boards, griping that MusicNet and Pressplay have features and a playlist that can’t rival the illicit sites.

“I don’t expect to see any significant uptake in the subscription services out there right now unless we see a dramatic change in what they are offering. As consumer propositions, they are far from appealing,” said Snell.

Former industry nemesis Napster, now backed by BMG, will be reintroduced in coming weeks as a legitimate, pay service. Major retailers are also planning music download ventures.

While the industry has mixed feelings about the expected impact, the normally upbeat research firm Jupiter Media Metrix issued a reduced projection that online music sales will hit $5.5 billion by 2006, $700 million below an earlier estimate.


Illicit copying continues to wreak havoc in the industry even though Napster, the pirates’ favourite trading post, was temporarily closed last year.

The IFPI put a value of $4.2 billion on pirated music in 2001, largely in the form of illicitly-copied or “burned” CDs and online piracy. The ratio of CDs sold to the number of CDs burned hit an all-time high of one-to-one last year.

“I’m convinced in my own mind that more people listened to music in 2001 than ever before. We just didn’t get paid for it,” said the IFPI’s Berman. “We are beginning to address this (piracy) issue. We will do better in 2002 than 2001.”

The gloom is compounded by the fact that music is competing with many forms of entertainment today.

Overall, global music sales tumbled an estimated 10 percent last year due mainly to an abysmal performance in the world’s two biggest markets – the United States and Japan.

With global economies still sluggish and regulators making it clear that further mergers among the top five will not be tolerated, music labels have been slashing costs to squeeze every last penny out of their businesses.

“The industry needs a long-term fix. But some big hits would help in the meantime,” concluded one analyst.

The Midem music conference runs January 19-24.

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