Record Company Year End Stats etc...

John Macy · From: Rockport TX/Denver CO

(from the LA Times)

After a Rocky Year, Time to Face the Music
A look at the record firms, one by one, as the industry's problems mount

By Jeff Leeds, Times Staff Writer

Suddenly, the music industry is hardly worth a song.

Wall Street is slashing record company valuations. Despite efforts to thwart them, digital pirates are still taking songs for free. And label executives, scrambling to lure fans to record stores, have sparked a price war that is putting new albums on sale for less than $7 in many cases.

Overall, global music industry revenue dropped about 8% to roughly $31 billion in 2002, according to analyst estimates, leaving media giants that only recently saw music as the key to their corporate strategies to question whether they belong in the record business at all.

Yet getting out is a problem, too. Any company that hits the auction block now probably would bring only a fraction of its peak price.

The key question of the moment is how to reverse the year's 11% slide in U.S. album sales -- the worst performance for the crucial domestic in more than a decade. The latest results follow a 3% decline last year.

With profits plunging at the largest companies, some analysts predict that a torrent of layoffs is more likely than an industry revival in the months ahead.

This company-by-company assessment of the year's performance is based on regulatory filings, Nielsen SoundScan estimates of U.S. market share through Dec. 22 and interviews with key industry players.

Profit figures are for the nine months ended Sept. 30 or the most recent period for which data are available, measured against year-earlier results. Because companies report in different currencies and under varying methods, these comparisons reflect estimates made in consultation with Sanford C. Bernstein & Co. For foreign-owned companies -- that is, all the major distributors except Warner Music Group -- figures are based on average currency rates for the period.

Holiday sales, which typically account for more than one-third of annual revenue, haven't been counted yet. To date, however, data suggest that the record industry needs more than a good Christmas.

It needs a miracle.

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Universal Music Group

* U.S. market share: 28.9%

* Worldwide sales through Sept. 30: $3.9 billion, down 5%

* Operating profit through Sept. 30: $172 million, down 51%

* Major labels: Interscope Geffen A&M, Island Def Jam, Universal, MCA

How far has the value of music fallen?

Look no further than the world's biggest record label, which was assembled just four years ago in a deal then worth $10.4 billion. This year, new accounting rules forced French parent Vivendi Universal to take a charge of about $3 billion to reflect the decline in the worth of its music company.

Despite the hit to the bottom line, Chairman Doug Morris again dominated the charts with blockbusters from every genre. Jimmy Iovine's Interscope Geffen A&M complex takes the crown as the nation's top seller of new releases -- including the year's biggest, Eminem's "The Eminem Show," which has sold 7.4 million copies. The string of platinum-sellers also includes the rapper's "8 Mile" soundtrack, plus offerings from Puddle of Mudd, No Doubt, Sheryl Crow and DreamWorks' country phenom Toby Keith.

The Lyor Cohen-led Island Def Jam machine, for its part, delivered one of the year's biggest debuts with Ashanti. Meanwhile, it also cranked out hits from Ludacris, Ja Rule (the "Pain is Love" album, not the new, slower-selling "Last Temptation") Cam'ron and Hoobastank. But onetime icons Bon Jovi and Mariah Carey got off to slow starts.

Universal Records' Mel Lewinter and Monte Lipman once again struck platinum with hip-hop stars Nelly and Big Tymers.

Things were far quieter over at Jay Boberg's MCA Records, though R&B diva Mary J. Blige kept on selling.

Rivals say Universal's big labels continue to overspend on talent and promotions. And there is speculation that pink slips, which already have hit the Motown division, may spread throughout the company as Vivendi Universal prepares its entertainment properties for a likely spinoff or sale.

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Warner Music Group

* U.S. market share: 17%

* Worldwide sales through Sept. 30: $2.9 billion, up 4%

* Operating profit through Sept. 30: $76 million, up 15%

* Major labels: Warner Bros., Elektra, Atlantic

You've got belt-tightening!

AOL Time Warner's music division didn't land a single album in the year's overall top 10. But it still managed to raise its profit level heading into the holidays after Chairman Roger Ames clamped down on promotional costs, including trade magazine advertising, and overhauled back-office operations.

Warner Bros. once again finished the year as the AOL empire's most profitable label, but it still fell short of its glory days as a haven for innovative newcomers such as Jimi Hendrix and Joni Mitchell. In fact, the unit cut its release schedule about 20%.

Still, its savvy marketing machine scored with acts inherited from now-shuttered affiliates in last year's Warner Music Group restructuring, including Josh Groban and Disturbed. The label's new management team of Tom Whalley and Jeff Ayeroff also counted on the Red Hot Chili Peppers, Linkin Park and Enya to keep the engine humming, along with Michelle Branch from Madonna's affiliated Maverick label.

One Warner Bros. weakness is that it's barely in the lucrative rap-music game, and insiders still are waiting for Whalley's fabled ears -- which picked up on new acts such as Tupac Shakur and the Wallflowers during his tenure at Interscope Records -- to find a home-grown chart-burner. Sluggish domestic sales also stung Maverick's Alanis Morissette and Warner stalwarts the Goo Goo Dolls.

Over at Elektra Entertainment, it's been a difficult year, though label chief Sylvia Rhone came through with a hit from Missy Elliott and broke new artist Tweet. The label's weak streak could be reversed if Rhone can extract new albums next year from rock bands Metallica and Staind.

Things were also tough at the Atlantic Group, where long-awaited albums from Brandy and Uncle Kracker bombed. But the label's prayers for continued sales from Christian rockers P.O.D. came through, and there still may be a chance to salvage Kid Rock's most recent album. Under Chairman Val Azzoli and new co-presidents Ron Shapiro and Craig Kallman, the label also has built a potent black-music roster, with the Nappy Roots and Fat Joe breaking through this year.

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Sony Music Entertainment

* U.S. market share: 16.5%

* Worldwide sales through Sept. 30: $3.5 billion, down 1%

* Operating loss through Sept. 30: $142 million, contrasted with a $61-million profit a year earlier

* Major labels: Columbia, Epic

Sony Music Chairman Thomas D. Mottola weathered a year in which his wife's sisters were kidnapped and one of his biggest acts, Michael Jackson, depicted him as the devil.

The sisters are free, and Jackson has quieted down. But Mottola has to rescue the Sony Corp. music operation, whose bottom line was hurt by charges from an international restructuring, even though a number of albums scored on the charts.

One effort: more advertising-based promotions, such as a much-touted deal with PepsiCo Inc. Sony also hopes to woo ex-Interscope marketing whiz Steve Stoute to its executive suite, if talks pan out.

On the label front, Sony settled the Dixie Chicks' royalty-accounting dispute in time for Columbia to make the country act a cross-over pop sensation and the company's biggest seller at 3.4 million copies. Other major successes: John Mayer, Bruce Springsteen, System of a Down and Nas. Those, plus Columbia's storied catalog, helped make Don Ienner's label the nation's overall market-share champ for a fifth year in a row.

Even in a down year for the industry, Epic Records, led by executives Dave Glew and Polly Anthony, still is regarded as a hit factory. This year, it delivered big sellers from stars Celine Dion, Jennifer Lopez and Shakira, while breaking through with new acts B2K and Good Charlotte. One soft spot: Korn's long-awaited album topped out at 1.2 million copies, which was respectable but far below projections.

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Bertelsmann Music Group

* U.S. market share: 14.8%

* Worldwide sales for the six months through June 30: $1.1 billion

* Operating loss through June 30: $41 million

(Closely held Bertelsmann doesn't publicly report results and declined to provide data for yearly comparisons.)

* Major labels: Arista, J, RCA

BMG rediscovered its catalog, turning out an Elvis Presley compilation that sold 2.3 million copies. But it's going to take more than repackaging "Jailhouse Rock" to make up for the ill-advised arrangement with Zomba Music's Clive Calder.

Calder's deal of a lifetime -- he exercised an option that forced BMG's parent company to buy his slipping label for $2.7 billion -- all but assures that the German firm will find music a red-ink zone for years to come.

At the same time, BMG gave observers whiplash, bringing music icon Clive Davis back as chief of a combined J Records-RCA operation, less than three years after driving him from his seat of power at its Arista label. Even Davis won't find it easy to revive RCA. He may start by trying to keep the Dave Matthews Band from jumping ship. The band is shopping a new deal, though sources say it owes the label two more albums.

As for Arista, the only real question may be: Does anyone still think Antonio "L.A." Reid can't run a pop label?

If so, they clearly weren't paying attention to Reid's results at the unit, which he took over in 2000 amid doubts by some critics about whether his R&B roots would translate. Arista delivered two of the six biggest albums of the year with Avril Lavigne and Pink, while posting solid sales from Usher, new act Clipse, and a decent start for the Carlos Santana album. Reid's decision to bid adieu to Sean "P. Diddy" Combs and his expensive Bad Boy label probably will save him a bundle, but rivals claim he continues to waste money on joint ventures with producers Jimmy Jam & Terry Lewis, She'kspere and TrackMasters.

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EMI Group

* U.S. market share: 9.3%

* Worldwide sales for the six months ended Sept. 30: $1.5 billion, down 10%

* Operating profit for the six months ended Sept. 30: $86 million, up 253% (EMI doesn't report quarterly results.)

* Major labels: Capitol, Virgin

With nowhere to go but up, EMI posted solid worldwide results thanks in part to a cost-cutting drive that eliminated 1,900 employees and tightened the cap on executive salaries.

Now, top executives Alain Levy and David Munns have vowed that by spring EMI will break even in North America, where its record division has long been a money-loser.

Indeed, EMI is hitting a crossroads, and it's at the intersection of Hollywood and Vine: The verdict is still out as to whether new label chief Andy Slater has the vision to revive Capitol, although he eked out modest hits this year with such acts as Kylie Minogue, Coldplay, the Vines and Dirty Vegas. Morale is rising at Capitol headquarters -- known simply as the Tower -- and spirits may perk up further if EMI can close a new record deal with Radiohead.

At the relatively small Blue Note division, executive Bruce Lundvall deserves a reward for signing singer Norah Jones, the company's biggest seller with 2.4 million copies sold -- although rivals joke that it shouldn't come in the form of stock. EMI shares, like those of rivals, have plunged.

Virgin Records continued to be a financial sinkhole, delivering only a Rolling Stones compilation (while handling radio promotion for Blue Note's Norah Jones). After the label's move from Beverly Hills to New York and a reorganization in which about 80% of the staff quit or were fired, industry watchers are waiting for new co-chiefs Matt Serletic and Roy Lott to put their imprint on the company. Things could turn up next year with new albums from Janet Jackson and buzz bands the Exies and Black Rebel Motorcycle Club.

[This message was edited by John Macy on 07 January 2003 at 08:26 AM.]

Jerry Brightman · From: Ohio

John,

This was a very interesting article...Thanks for sharing this with us...

Jerry http://www.slidestation.com

chas smith R.I.P. · From: Encino, CA, USA

When a movie or an album tanks and it affects the stock market you can be sure that it ain't about art anymore.

Jack Francis · From: Queen Creek, Arizona, USA

Now I ain't no rocket scientist .....but could it be that the music being produced today isn't worth purchasing????
Just my way of looking at it.

Jack

Donny Hinson · From: Glen Burnie, Md. U.S.A.

I wonder how much of their losses were due to their multi-million dollar music-video expenses? (I'm willing to bet it was a significant chunk.)

I'm about sick of those "hat and belly-button 4-minute musical soap operas", anyway.

erik · Posted 7 Jan 2003 6:39 pm

That's the fact, Jack.

Alvin Blaine · From: Picture Rocks, Arizona, USA

Looks like the Dixie Chicks helped Sony from posting a big profit loss. Can someone explain how a company makes $3.6 BILLION one year then only $3.5 BILLION the next year, and they say that they lost money?
If I did twenty gigs last month and made $3000. then I only play fifteen gigs this month and make $2250. I don't say that I lost $750.
And how did Warner post a 15% increase without having a single album in the year's overall top 10 ?

Craig Stock · From: Westfield, NJ USA

Record companies waste so much money on parties frills, trips, etc. Why do you think AT&T is in such a bad way today. My sister-in-law used to work for them, they would fly 500 people plus spouses to Hawaii for 4 days for supposed conferences,feed them and hire top named entertainers every night. They always say it's for teamwork and to boost moral. I say garbage, give them a few extra bucks(bonus)and use that money for something more constructive.
I believe with the internet today, most record companies are obsolete, with recording becoming easier and marketing by artists themselves, they don't need them anymore. Look at Dave Matthews, who did what he did with no major label support.

The product should be of quality also, most of todays 'POP' is disposable, most kids I know will download one song off and album, so it's not worth them buying the whole thing. Why are lots of the classic albums still selling. Look at 'Pink Floyd' 'Dark Side of the Moon', 'Who's Next' by 'The Who'. They stil sell well today, because the material is so good. If artists worked on fewer songs and made them better than having to pump out product, things would get better. I have thousands of records and very few artists put out consistantly great material, most stuff is throw-away.

I think artists should take things into their own hands and control their own destiny, like a small business owner. Plenty of artists are doing well touring and distributing their own stuff and doing well. That is the wave of the future. Well at least that's the way I see it.

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Regards, Craig

[This message was edited by Craig Stock on 08 January 2003 at 08:16 AM.]

Donny Hinson · From: Glen Burnie, Md. U.S.A.

We may well see recording become a "cottage industry" again...worse things have happened. Similar things are happening in retail, these days. Wal-Mart, K-Mart, Target, et al, come to town, and soon all the "mom and pop" stores close. Fast-forward a few years (to today), and all the "biggies" are hurting. You see, the "mom and pop" stores didn't have to pay executive salaries, bonuses, and dividends to stockholders! Mass-marketing makes a killing...for a while. Then (after the market is saturated), things start going down. What was that old saying?

"The hotter the fire...the sooner it burns out"

Craig Stock · From: Westfield, NJ USA

The beast of 'Home Depot' reported that they are having rough times now. Too much expansion. Thank god we still have some great Mom & Pop Stores where I live, but elsewhere Hd and Walmart have done their damage, kinda like communism

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Regards, Craig

David Pennybaker · From: Conroe, TX USA

David Pennybaker · From: Conroe, TX USA

Craig Stock · From: Westfield, NJ USA

David, Exactly, overexpansion, plus the workforce there is grim, at the small hometown home center they bend over backwards to help you, and truthfully, the prices average out to be about the same.

Sorry I sound this way, but I beleive small business is the backbone of America. Any one see that flag waving?

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Regards, Craig

[This message was edited by Craig Stock on 08 January 2003 at 03:19 PM.]

David Pennybaker · From: Conroe, TX USA

I've also wondered just how much more Wal-Mart can really grow.

Heck, they're already expanding into grocery stores.

Craig Stock · From: Westfield, NJ USA

They're kinda like BIG BROTHER in some parts of the country. How much does Sam's Family really need, maybe their own state.

I can see it now the 51st state, North Walmart. We can cash your check, feed and house you and tend to all your medical needs at a very low price, hell, we'll even bury you for free, just don't move out of state, 'cause you won't be able to afford it.

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