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ivan@stellysee.de
| From | "josh chasin" <jchasin@nyc.rr.com> |
| Subject | Re: CD sales in 2003 |
| Date | Thu, 19 Feb 2004 17:13:19 -0500 |
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I'd like to pose a hypothesis and get opinions.
Understand that I am coming at this as a guy with 2 marketing degrees but no
music business experience.
It seems to me that the music business is the only industry that dedicates
90% of its marketing dollars to the light purchasers. In all other
businesses it is understood that the heavy purchaser accounts for the most
profit and upside, and that the way to make money is to attract and retain
profitable customers, who are generally heavy purchasers in the category.
A major label makes money selling a million units of a single release-- but
not, apparently, 20,000 units of 50 titles each.
But this is product-centric thinking, and it is axiomatic that good
businesses are consumer-centric. Because I feel like the million sellers
are bought by the guy who wanders into the record store 2 or 3 times a year,
and the 20,000 sellers are bought by-- well, us. Heavy purchasers.
Shouldn't there be a way for a record marketer to target my share of wallet,
as a heavy spender?
Similarly, one finds that the heaviest purchasers in a category are
generally most likely to be the competition's best customers as well. As a
20-year-old (before the Internet) I was taping concerts off the radio and
actively trading them. I still do this (only now it involves CDRs and
downloading.) But I remain a heavy purchaser. Indeed often someone would
give me an album on tape; if I liked it I would go buy it. If I didn't I'd
probably have taped over it.
So I have a sneaking suspicion that the heaviest "pirates" are also the
heaviest music purchasers. In other words, the people on Napster-like
services are more likely the heavy music buyers-- even given the impact of
file sharing on their behavior-- than the average population. So pointing
at file sharing as the demise of the industry is like McDonalds blaming its
breakfast customers because breakfast sales are down.
If you go to a person's home and they have 5,000 CDs, and the next day you
go to a person's home and they have 50 CDs, who is more likely to have this
year's big seller? I submit the latter. And who is spending more money
with the music business? Clearly the former. If I was Delta Airlines and I
could have one of two customers-- the guy taking 50 air trips or the guy
taking 5,000-- is there any question which one I'd want?
It all makes sense from a marketing perspective. But I get that the
economics of the music business are unique. Is there a way to improve the
business model by shifting the marketing dollars from light to heavy
consumers? Do you buy the premise that light consumers end up as primary
target for music marketing monies? (Remember how much of that money goes to
record promotion to buy hit singles; for in-store displays; etc.)
I'm genuinely interested in opinions.
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