2007: What a Disruptive Year it Was
by
Paul Resnikoff, Publisher
Digital Music News, January 2nd,
2008
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The music industry continued to weather a disruptive earthquake in 2007, and
that spelled distress, opportunity, or something in-between for everyone
involved.
For Superstar Artists...
the year spelled fresh opportunity,
and fearless experimentation.
Perhaps the biggest upheaval came from
Madonna, who inked a massive, all-encompassing deal with Live Nation valued at
roughly $120 million. The artist ditched Warner Music Group in the process,
and crystallized a movement by big-name superstars away from their major label
nests.
Radiohead also flapped its post-major wings, though the
experimental skies offered some turbulence. The group offered their latest
album online and allowed fans to name their own price, but mixed results and
price tags emerged. And heavy trading across file-sharing networks also
surfaced, despite the existence of a legitimate download destination.
And
Prince continued his independent streak, this time with a bundled album release
involving the UK-based Mail on Sunday. Elsewhere, The Eagles also flew free,
and inked an exclusive sales pact with Wal-Mart.
But not everyone strayed
from their major label roots. Led Zeppelin suddenly awakened from a
digital-unfriendly slumber this year by licensing their catalog for both online
and mobile download. The Warner Music band also reunited for an unexpected gig
in London, and struck a short-term licensing deal with both ESPN and the
NFL.
But for Labels, the Skies Continued to Gray.
During the
year, major labels struggled against a downward spiral in pre-packaged album
sales. Paid downloads continued to increase, though broader album sales plunged
roughly 15 percent year-over-year (official numbers have yet to be tallied).
That continued to put heavy pressure on labels to reinvent their models, and
pressing financial pressures prompted layoffs and continued
cuts.
Elsewhere, the RIAA opened a massive, college-focused enforcement
campaign, the latest chapter in a mostly ineffective crackdown
initiative.
Meanwhile, EMI Group itself was gobbled by private equity
firm Terra Firma for a massive £2.4 billion price tag. And Universal Music
Group parent Vivendi Universal gained European regulatory approval for its €1.63
billion ($2.19 billion) purchase of BMG Music Publishing.
Other
Mega-Buyouts, Mega-Mergers, and Mega-Divorces Also Surfaced.
Perhaps the
largest involved recommendation startup Last.fm, which was purchased by CBS for
$280 million in late May. But other mega-deals also surfaced, including the $42
million acquisition of Pump Audio by Getty Images. And towards the tail end of
the year, Macrovision grabbed AMG for $82 million, Dolby purchased Coding
Technologies for $250 million, Microsoft purchased Musiwave for $46 million, and
Live Nation purchased Signatures Network for $79 million.
In the merger
category, independent distribution and marketing company The Orchard merged with
Digital Music Group, Inc. (DMGI), a cashless transaction.
In divorces,
Live Nation confirmed an upcoming split with longtime partner Ticketmaster, and
started preparations for a full-scale break in 2009.
And others,
including the once-promising Snocap, entered the sales block.
And
the Shiny Apple Continued to Glow.
Apple already entered 2007 with
immense momentum, thanks to stellar holiday iPod sales. That story blossomed
over the ensuing months, and Apple crossed the 100 million mark in April.
But the biggest accomplishment came from the iPhone. The game-changing
device experienced an immense media blitz in the United States, and subsequent
launches in the United Kingdom, France, and Germany.
And Wall Street
kept cheering Apple by doubling share valuations towards $200.
But
Microsoft experienced a less stellar year, especially within digital music. The
first-edition Zune, released in late 2006, failed to spark consumer excitement
in 2007. A second-generation emerged towards the tail end of the year, though
questions linger over Zune sales prospects.
And the Ice Finally
Cracked on DRM.
A shift away from digital protection by major labels
became a reality in 2007, thanks to a first step by EMI Music. Also motivating
the move was Steve Jobs, who forcefully urged a departure from protections in a
February open letter. The EMI break, a collaborative effort involving Apple,
motivated subsequent shifts by both Universal Music Group and Warner Music
Group.
Speaking of DRM-free, Amazon finally entered the space with
an MP3-only store.
EMI Music naturally embraced the effort, and Universal
Music Group and Warner Music Group eventually followed.
Starbucks
Got Serious About its Music Strategy.
The coffee giant minted its new
Hear Music label, a collaborative effort involving Concord Music Group. Paul
McCartney kicked the action off and eventually crossed 500,000 units, a result
that raised questions over the potency of the Starbucks
approach.
The Satellite Radio Sector Decided to Consolidate
but
regulators ultimately served a non-event.
The biggest thud remains
ahead. Both XM Satellite Radio and Sirius Satellite Radio aggressively lobbied
regulators to approve their proposed merger, though a year-end decision was
mostly wishful thinking.
Internet Radio Faced Increased Royalties
and the beginnings of a serious standoff.
For a large part of the year,
internet radio stations battled a royalty rate decision issued by the US
Copyright Royalty Board (CRB). The tussling is now spilling into 2008.
-----
Paul Resnikoff is the founder and publisher of Digital Music
News (www.digitalmusicnews.com), a premier industry source for news,
information, and analysis. Digital Music News has quickly grown from its humble
roots as a small, executive news service to the most widely read information
source in the field.
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