What's the difference between AC/DC and the major music labels?
Only one is singing "Back in Black" these days.
Yes, the prerecorded music industry has been in a tailspin since CD sales began to erode at the turn of the millennium. Higher-margin digital music sales were supposed to save the day, but they haven't been enough to rescue the players from their red-stained income statements. Warner Music Group (NYSE: WMG ) , for instance, has posted a loss in seven of the past nine quarters.
Everyone knows that the labels are battling the new media threat of piracy, but did you know that the music makers are also seeing their more seasoned stars recruited by old-economy players?
The Wall Street Journal is reporting that AC/DC will be selling its next CD exclusively through Wal-Mart (NYSE: WMT ) . Yes, Wal-Mart.
The world's leading retailer is no stranger to pushing rock oldies. Wal-Mart has struck similar deals with Journey, Bryan Adams, and The Eagles. In fact, an April Rolling Stone article points out how The Eagles' Long Road Out of Eden -- a two-disc CD set, artfully priced at $11.88 exclusively through Wal-Mart -- became the third best-selling record of last year.
Highway to sell
It isn't just Wal-Mart signing bands away. Last year found Madonna leaving her label for a long-term deal with concert promoter Live Nation (NYSE: LYV ) . Paul McCartney decided to release Memory Almost Full through Starbucks (Nasdaq: SBUX ) last year.
With discount department stores, live event promoters, and premium coffee houses becoming the new music brokers, is it any wonder to see the majors reeling?
It gets worse. Madonna, McCartney, and The Eagles proved marketable, but when was the last time that AC/DC had a hit? It's been ages since the Australian rockers shook the stateside charts all night long. However, AC/DC is just the latest retro powerhouse to realize that it doesn't really need a major label when it can milk its classics on the touring gravy train, releasing the occasional disc along the way.
The ability of Wal-Mart, Starbucks, and Live Nation to generate adequate promotional muscle for The Eagles, McCartney, and Madonna will make it that much easier for proven acts to snip the strings in the future.
Record labels wouldn't care if that was the extent of the damage. Losing pricey veterans that are often dry on new, mainstream material is the equivalent of a football team cutting a costly veteran for a fresher set of legs. The problem is that the rookies aren't coming along to replenish the supply.
Shows like American Idol are launching the next generation of crooners. Kid-geared cable channels like Disney (NYSE: DIS ) and Viacom's (NYSE: VIA ) Nickelodeon are using their media platforms to catapult the careers of pre-teen magnets like Hannah Montana and The Naked Brothers.
Compound that with indie artists that are now able to reach global audiences through social networking websites like MySpace or video-sharing hubs like YouTube, and it's easy to see why the major labels are pressing buggy whips these days. If old acts are bolting and new acts are sidestepping, what's a label to do?
You won't hear this from the actual labels, of course. They're too busy going after file-sharing networks or search engines like Baidu.com (Nasdaq: BIDU ) to realize that commercial pilfering -- not consumer piracy -- is what really moved their ear cheese.
Will they realize that the trends have passed them by if they miraculously squash piracy, only to find that it's not their music that kids were swapping? That's the kind of embarrassment that could topple models, especially ones that don't realize how brittle they really are in current relevance.
Getting signed to a record deal is so passe these days.
For those about to stock -- CDs at your local Wal-Mart, that is -- we salute you.