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HITS Daily Double
"We need to keep all formats successful."
—-J.J. Schaidler, Sony

NARM DISPATCH #4:
INTO THE HOME STRETCH

Where Are We Headed? Darned if We Know
Tuesday morning at NARM started with a packed house for one of the most anticipated panels of the convention. The State of the Industry Part One was moderated by the L.A. TimesJon Healey with WEA’s Mike Jbara, UMGD’s Amanda Marks, Sony’s J.J. Schaidler and EMI’s Darren Stupak.

They talked about an array of subjects, including, of course, the still-small but hopefully burgeoning mobile business. Marks hopes that mobile might not be as cannibalistic as online usage. Jbara talked about ad-based streaming, saying that alone won’t take care of stemming the decline, with Schaidler adding that ad sales in general were in distress and that it’s the wrong time to go in that direction. Marks pointed to Spotify, remarking, “Unfortunately, no one is upgrading the premium model because there is currently so little advertising in the free space.”

Kiosks, a hot topic a few years ago, roundly got a thumbs-down, with Schaidler (whose background, of course, is with Best Buy) saying it was too labor-intensive. Stupak talked about the need to keep the consumer engaged between full-length releases and pointed out how many different buying opportunities that Coldplay gave their fans over the last year with more on the way.

Talking about subscription, while Jbrara said that it will be a big part of the future, Marks said flatly she didn’t believe that ownership would be the ultimate model. Talking 360 deals, Jbrara boasted that Warner is currently reaching 50% globally with their artists. Stupak said: “We call ourselves a music services group,” meaning that they were gearing up to sell any kind of bundled product.

Mobile? Jbrara: “It’s early.” Marks: “The growth of smart phones which require that you have broadband capabilities will help.” Schaidler: “Some people just want their phone to be a phone.” Stupak: “Music still isn’t at the forefront of the apps being consumed.” When Homers' Mike Fratt asked from the crowd about the fact that the value proposition of the CD was never addressed, Jbara flatly said he believed that the CD was going away and we needed to find out what was next, with Schaidler disagreeing, saying: “We don’t want to grow digital at the expense of physical. We need to keep all formats successful.”

Next up was the Changing Models for Content Delivery, moderated by NARM’s Mill Wilson with Napster’s Christopher Allen, Lala Media’s Billy Alvarado, Microsoft’s Christina Calio, Verizon’s Tom Constabile, Rhapsody’s Dave Krinsky, Newbury ComicsCarl Mello and Amazon’s Craig Pape.

The panel served mostly as a commercial for displaying each company’s particular strong suit, all of which have their own particular strengths, including what Mello described as “our quaint little business model called brick and mortar.” That being said, Pape told the crowd that Amazon still believes in physical, but much of catalog should go strictly digital. Constabile said that Verizon was focusing almost entirely on track sales because they got their start in the music biz with ringtones. “We’re trying to justify our role in the value chain.”

Allen was the first to jump on the importance of “interoperability” “People want to access it wherever, whenever, on whatever they want.” He also talked about their relationship with Best Buy and brought up what he called a “blue shirt” moment when a clerk turned someone onto something and likened it to discovery opportunities on their site.

After that, Mello commented: “We are more into selling widgets than warranties. Music is currently only a third of our revenue.”

Speaking of revenue, the word of the day was ARPU. And for those that don’t know the meaning (I had to ask Motorola’s Dave Ulmer, who was also attending the discussion), it stands for Average Revenue Per User. Pape wrapped up proposing that we have to find our way to bundling both subscription with an ownership model because in his opinion neither will work on its own.