Shipments of tunes hit low note

Shipments in the recording industry dropped 9.7% in the first six months of 1997, due to a decline in record club and direct mail sales, according to figures released by the Recording Industry Assn. of America on Tuesday.

Overall revenue for the recording industry is down 5% from January to June of this year to $5.2 billion, marking a drop from the $5.5 billion tally logged during the same period last year.

Despite the RIAA declines, SoundScan’s year-to-date tallies show unit sales are up 7% to 437 million units for the period ending Aug. 10 compared to the 408 million units for the same period in 1996. SoundScan numbers reflect product sold through to consumers, rather than shipped by manufacturers to retailers.

But the bottom line is that a steep decline in cassette sales and special market sales precipitated the 9.7% overall decrease in shipments for the recording industry.

The RIAA’s midyear report was based on stats obtained by the trade org and compiled by the accounting firm of Coopers and Lybrand that reflected net shipments of product by the major manufacturers after returns.

Leading the decline is a 26.5% drop in cassette shipments, which translates into a 24.5% decrease in cassette sales revenue.

Cassette shipments, which are tallied at the suggested list price like all product in the report, dropped to $654 million in 1997 from the $866 million total reached during the first six months of 1996.

Overall compact disc shipments were down 7.3% for a total drop in CD sales revenue of 2.3%. More than 331 million CDs were shipped in 1997 compared to 357 million units in 1996.

SoundScan CEO Mike Fine attributed the drop in revenue to a sharp decrease in music club revenue. “The clubs are hurting,” Fine told Daily Variety, adding that the recruitment and promotions programs at the clubs have dropped off significantly.

Specialty market shipments, which include everything from record club sales to Starbucks point of purchase CDs, were off by as much as 25%, according to John Ganoe, veep of member services for the RIAA. Specialty sales adds up to approximately 18% of the total recorded music industry market.

Indeed, the 3.2% increase in shipments to retail outlets failed to mitigate the dramatic decline in CD shipments overall.

Fine, like other music industry execs, said the decline in music clubs and direct sales could become a positive force in the long term. “Now these same people that are not going through the clubs are paying full price at retail,” said Fine.

The industry is also poised for growth after three flat years. The rash of store closings has slowed considerably, many chains have considerably trimmed the fat and the all-important fourth and first quarters, where as much as 65% of a conglom’s annual sales can be logged, are approaching.

Still optimistic

“You have the beginnings of a healthier business here,” said Henry Droz, prexy of Universal Music and Video Distribution. “In my view, the business is really settling down and we should see some (substantial) growth in the months ahead.”

The decline could not be offset by the increase in retail shipments or the 70% increase of CD singles shipments during the first half of this year.

Sales of vinyl is a mixed story with LPs and EPs showing a 16.7% increase in shipments for a bottom-line boost of $27.3 million, while vinyl single shipments dropped 18.2% for a decline of $18 million. The limited use by labels of the full album vinyl format as a marketing tool continues to grow.

Musicvideo shipments remained steady at 7.3 million units but revenues increased by 23.5% to $125.6 million. The format has grown considerably from being mostly a promotional tool to a profit center.

For the first time, the RIAA released figures for the Hispanic music market, which showed 22.8% increase in shipments in the first half of 1997 compared to the same period in 1996.

The Hispanic market shipped $213.2 million worth of product in the first half of 1997, a 25.1% increase over the same period last year.

“This report places a solid number on what we’ve known anecdotally: Hispanic music is rapidly expanding in the U.S. market,” said RIAA prexy/CEO Hilary Rosen of the Hispanic music figures.

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