The Year the Music Industry Broke

MTV published an end of the year review of the music business on December 17, "Madonna Ditches Label, Radiohead Go Renegade: The Year The Music Industry Broke." Month by month, it's a litany of bad tidings for the biz, from January 14, 2007, the day the Dreamgirls soundtrack hit number 1 on Billboard's pop charts with a scant 60,000 copies sold (lowest #1 ever) through December 3, 2007's announcements that Def Jam and EMI were laying off employees and Warner Music Group would cut executive bonuses (awww).

Reading the list at a sitting makes 2007 looks even more like a clusterfark than it seemed living it day by day—and that's saying something. Yet, there are encouraging signs that some people in the industry do have an inkling of what customers want.

The record label Nonesuch opened its new Internet store. Among the site's features is Nonesuch Radio, a streaming radio station, offering music from the label's catalog, including its latest releases. Since Nonesuch's back catalog is rich in ethnomusicological explorations, the site also features a responsive artist's search, which can pinpoint music by name, region, or country. What got us excited, however, was the Nonesuch store.

Buy Nonesuch CDs and you automatically get the music available as DRM-free downloads at 128kbps or 320kbps as soon as your order has been shipped—at no additional charge. Many discs also feature non-CD bonus downloads. At the moment, the vast majority of Nonesuch's back catalog has not yet been added to the site, but given the label's deep vaults, we look forward to exploring decades worth of great music.

At, Nat Lanxon made a bold prediction: In the next 12 months Apple will champion lossless downloads. We think it would be a superb idea, but we're fairly sure that, inevitable as that may be, it won't be Apple fighting the fight.

A heart-warming tale of Christmas: Over at The American Prospect, Dan Baker tells us the touching story of Santa Claus' largesse to Circuit City brass.

You remember how Circuit City "took aggressive action" by laying off 3500 of its most expensive—and most experienced—employees (read: $14/hour) with cheaper ones ($9/hour), opening it to a age-discrimination class-action suit. Perhaps, coincidentally, the company has had a hideous year, posting a disastrous third-quarter loss.

The company cited dropping sales of projection and CRT televisions and "lower extended warranty sales" than anticipated. As anyone in the A/V business could have told you a year ago, in this climate, you can't give CRT televisions away. Any retail floor space that isn't devoted to flat-panel displays is prime real estate hemorrhaging money. And extended warranties (or as we in the industry politely refer to them, "highway robbery") are a tough sell in any climate, but particularly in a troubled economy. That's the kind of thing best sold by, oh, say, your most experienced sales people.

With performance like that, there's only one thing an executive board could do: Declare victory and give its executive vice-presidents a $1 million "retention" bonus (that means they have to work at Circuit City until 2011); and senior VPs got $600,000.

"Our current focus," CEO Philip J. Schoonover told analysts, "is to rebuild our selling culture."

Good thinking.

Answering the charge that it appeared that Circuit City brass were being rewarded for poor performance (Merrill Lynch's Danielle Fox said it, not us), Schoonover said that it was essential he retain an executive culture that had taken him three years to assemble. He added that Circuit City sales floor wages were "competitive" and that supervisors were given "performance bonuses." (That's usually corporate speak for "meeting budget," ie keeping payroll down.)

Let's do the math, shall we? The guys doing the selling are expendable and have no job security, but the guys driving the company into the dustbin receive huge bonuses that guarantee their employment into the next decade—bonuses equal, as Baker points out, to what a $14/hour sales associate will make over 35 years.

Ho, ho ho!