Panelists: Music retailers must expand to video, online to survive

This holistic approach to entertainment consumption is emerging as a central theme of the 50th annual NARM conference, running May 4-7, in San Francisco, Calif. Consumers are purchasing more media than ever, but retailers need to increasingly diversify merchandise to match shoppers’ evolving tastes, according to NARM presentations.

“Entertainment is not homogenous,” NARM president Jim Donio told VB following his Monday keynote address. “It’s unreasonable to say that everyone wants entertainment the same way. Where is the right blend? It might not be just the CD as we know it. It could have music, have video and some game.”

During the first quarter, consumers purchased 724 million music, video or book units, according to Nielsen SoundScan. That represents 6.7% and 26.7% increases from comparable 2007 and 2006 frames, respectively. But bricks-and-mortar retailers must grapple with the fact that physical CD sales are declining, as videogame and download sales rise.

Between 2004 and 2007, CD sales fell 31% to 449 million units, regressing to 1996 overall sales results. Yet, videogame sales have soared 90% to $18.8 billion between 2004 and 2007, according to NPD.

Additionally, consumers are expected to purchase 1 billion song downloads by the end of 2008, marking a 29% leap over 2007.

EMA/NARM cooperation

With inter-industry collaboration in mind, Donio announced that EMA will start adding film information for the first time into NARM’s long established online searchable database.

Currently, NARM provides retailer members with comprehensive new release CD information across all labels, including artist and street date, among other product details. EMA will now reach out to its studio membership to add similar searchable listings of its DVD holdings to the NARM system.

“The retailers want this,” said Donio. “It’s the reality of the market, and we want to do anything to help them be more efficient."

EMA president Bo Andersen told VB at the conference, “This can help retailers and distributors get everything that they need to know. We really have the same members looking at the same issues.”

Andersen said he hopes NARM and EMA leadership can explore setting goals together, where both organizations can “recognize the symbiosis of their relationship.” Although the two organizations flirted with merging a couple of year ago, ultimately ruling against joining, Andersen said he hopes EMA and NARM nurture “their mutual relationship, because we need to be as close as we can.”

Bonuses attract consumers

Also on Monday, NPD presented the findings of a consumer survey studying reactions to new hybrid CD products. Many of these choices mixed a physical disc filled with songs, plus exclusive access to bonus video content. With Music Video Interactive (MVI), tunes sit within a physical DVD that also serves up bonus Web site material. NPD's survey showed that younger consumers had a relatively strong affinity for the product. Teens are considered the most notorious music pirates, according to NPD. Yet 44% of survey respondents ages 13 to 17 said they would definitely and/or likely purchase an MVI album.

NPD also singled out the USB Memory Drive as a product to potentially enhance CD sales. Upscale adults ages 45-54 seem enamored with this music alternative, according to NPD. This consumer type also is valuable for retailers, because they tend to buy more during one shopping trip than any other age demographic.

Echoing earlier sessions, NPD analyst Russ Crupnick concluded that consumers want something more than just traditional CD tracks.

“Bonus wins,” Crupnick said. “No matter what you bake in, just bake in value-added content.”