SALES ILLUSION OF THE RECORDING INDUSTRY

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“SALES, SALES ….SALES”! This was the common underlying theme of all business associated with the music recording industry. The measures of sales units to account for how many album units were sold. This gave a raise to the “1K” (1 000) model which was developed, then was used to determine how many thousands of albums or singles sold became certified as “gold”, “platinum”,”diamond”, all according to the interval levels of volumes sold of respective units.

The obsession for sales has been pitted as one of the fallacies to the state of the current climate that the music industry is now operating under. The fallacies that came with sales figures is the old adage of “numbers don’t tell the whole story”, which remains resoundingly true in this instance.

A certain phenomenon that was taken for granted was the risk of stocking of all the album units. One million units sold – didn’t always mean that one million records reached a million different households. The bulk order system was the chief reason as to how a music album reached a certain sales level, be it certified as gold, platinum etc. The illusion or even deception, boils down to the usage of the word “certified”.

In a normal procedure, the record companies executives would assign their distribution coordinators/officers to phone or approach the retail outlets or warehouses. From ascertaining the sales orders that are to be dispatched to the respective retail chain stores and warehouses, the transfer of risk of the stock was now with the retailers and warehouses. From there, the marketing coordinators and officers on behalf of the label, would setup advertisements and campaign on various platforms – in partnerships with the retailers to convince the public to purchase the album/project concerned.

The sound financial principles of modelling is always to get “money in advance”, before completion of a project. Depending on sales performances of previous  albums of past by a certain artist, that would serve as leverage for forecasting of pre-orders from  retail chains and warehouses. The bargaining power of the labels was heightened from their past sales figures and giving exclusivity of sales to the retail stores. Due to the pre-order numbers – it was already CERTAIN as to how many units will be at the stores. The record labels by that time, have made  their money already  just nearing the completion of the album(project) . Thus the prominence of the “certified” tag – before the “gold”, “platinum”, diamond etc.

In light of the internet revolution and digital sales and piracy, it is small wonder why the retail stores are the first to close down. Given that the retail stores and physical copy music shops, are the chieftains of risks in stocking music albums. As a point of reiteration , by the time they reach the stores – the record company has covered all its expenses and ascertained profits from the sales. The stores now have the risk of selling the album, by then they spend more on promotions in order to clear out the stock in order to generate profit on purchases. This pressure adds more unit of currency spend on the value adding principles, to the final selling price that is commissioned by ways of the consumer.

 The after – sales proceed model that the retailers have, has seen little recovery of the amounts spent from the record companies – which has led them to the point of potential bankruptcy. This is why – sales in the music industry, did not always tell the WHOLE story. This gives further explanations as to why artists would sell a significant amount of records on paper, yet still get “dropped” before their contract has expired by the record label.

In today’s climate, it made it near impossible for a new act to be signed by major labels. Only if the new acts have an astonishing amount of sales figures to their name independently, and have garnered enough buying power according to the “1K” model, can a record company open up negotiations with an artist nowadays. The sales, sales culture shift has now turned and the onus of risk is with the artist presently, whereas before it was with the retail outlets.

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