The Canadian Music Industry - views from Larry Leblanc

Here's an interesting article from Exclaim!. Larry Leblanc is one of the most experienced music industry journalists and commentators in Canada.

Larry LeBlanc
Publisher of the LeBlanc Newsletter
By Allison Outhit

Larry LeBlanc has been a leading figure in Canadian music for four decades. Canadian bureau chief of Billboard magazine from 1991 to 2007, Larry was also the co-founder of the late Canadian music trade, The Record. He is currently publisher of The LeBlanc Newsletter.

What’s going on in the retail sector?
Despite the loss of A&B, Music World and Sam’s we still do have a traditional retail base here but they have competition from the big box stores like Wal-Mart and Costco, and they have lost the ability to sell a lot of catalogue with good margins. On most leading product, the retailer isn’t making all that much money. After all the pricing plans, the retailer might be buying for $10.35 and selling for $13.99. That’s not much of a margin. In the past they could buy catalogue items at $10 and sell them for $24. So this puts pressure on all the record companies when HMV and Archambault are saying they only want product they can sell under $18. And artists who were getting $9 or $10 per CD from their distributor are now getting $5 or $6. That’s the new math.

How is this affecting independent artists?
Well, DVD pricing is also driving music prices down. If you can buy Fargo at $10, you’re not going to buy the Weakerthans for $18. Also, a major is going to sell the retailer two pretty big titles at $8 a piece, but they’re being charged $13 for an independent product that may turn over once or twice while the two major titles are going to turn the first week they are in the store. It doesn’t take much to figure out how retailers are going to choose. So, the pricing has gone down and the opportunities have gone down for independent artists. This year we’ve seen more concentration on trying to get internet sales and more sales bounce out of live appearances. More bands are relying a lot more on the revenue they’ll make on the road and have almost given up on physical retail.

Will digital sales make up the shortfall?
As much as the industry keeps talking about the shift to the internet, for mainstream product overall we haven’t seen the big sales numbers. We’re seeing it in terms of individual tracks that are downloaded, but it hasn’t replaced the revenue that we’ve lost in sales over the last few years. I don’t believe anyone’s making a lot of money from that other than iTunes. We do know that 92 percent of most revenue from album sales still goes through retail in Canada, partly because we have a lower penetration of high-speed internet. But also I think it’s because there’s a lot of crappy music out there. The day when people would buy the whole album for that one song is over. Give them an album they want, and they will buy it. We’ve just seen that with AC/DC — it was the highest sales entry in seven or eight years.

What’s happening with major labels?
These companies have been either pared away so badly that they are running on shoestring and oil, or they’ve been in play [sold and resold] for so long and gone through chaos. Those things have affected A&R [artist development] in the industry overall. To get an artist to star status probably takes two or three albums. Five years ago no one would have gone to an EMI because the company was in turmoil. The same is true for Sony BMG and Warner. The only company that escaped that was Universal, so at least they’ve got something in the A&R pipes.