Warner Music (WMG): Next Year Will Be Awful (Dinosaur Media DeathWatch™)

Silicon Alley Insider ^ | November 29 2007 | Peter Kafka

[Milhous]

Warner Music doesn't formally offer guidance to Wall Street. But read between the lines from its just-concluded Q4 earnings call and it's pretty clear that WMG is going to have a lousy 2008:

• Physical music sales are going to continue to plummet, and retailers are indeed going to cut back on the shelf space they devote to music, which will compound the decline. WMG's Edgar Bronfman Jr. is more optimistic than some: He predicts that recorded music sales will only drop in the "mid-teens".

• Digital sales growth, which Warner has been counting on to counter the drop in CD sales, has been slower than expected. And there's no reason to think that pace will pick up next year.

• Mobile sales, which have been bailing out WMG and the rest of the business, are "weaker than we'd like to see," Bronfman said, in large part because "ringtones have lost their luster". And the stuff that was supposed to replace them -- over the air music downloads and gimmicks like "ringback tones" -- has yet to take off.

[Milhous]

Warner Music Boss: We Were Wrong

Someone in the music industry finally seeing the error of their ways? A blue moon rose over Macau Wednesday when Chairman and Chief Executive Officer of Warner Music Group Edgar Bronfman admitted on stage that the music industry had been asleep at the wheel.

Bronfman told the audience at the GSMA Mobile Asia Congress that mobile operators should not make the same mistakes that the music industry has:

We used to fool ourselves…We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won.

The remarkable thing about Bronfman’s admission is that the music industry considered what they were doing, in trying to limit consumer choice, to be a war. It’s a frank and honest admission that’s a positive for the music industry in moving forward from the sins of the past, however one mans words alone do not herald a sea change in an entire industry. Having said that though it’s still nice to see at least someone has woken up to the realities of today’s marketplace.

(via MacUser)

[Milhous]

ping

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Coral Ridge Ministries, proclaiming truths that transform the world.

[Grampa Dave]

"How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won."

With the internet and other ways to advertise and buy products, any product or service provider, who goes to war with consumers and tries to deny them what they want, will be ripped to shred by competition.

I'm still amazed at how many retailers, both independent and chain owned, refuse to carry what customers want/need and try to push their inventory instead. Inventory that was purchased without much nor any input from the consumers.

This is why elite liberals and botique liberal shop owners hate capitalism and the internet. They can no longer do business their way and not provide what the consumers want at a good price.

[Milhous]

As a small business owner I firmly believe in Just-In-Time (JIT) inventory where an item arrives the day before a client needs it. LOL. Allow me to share my perceptions gained from an old client, the May Department Stores Company.

Each buyer got a budgeted amount to spend on inventory and became solely responsible for moving all product purchased with that budget. But the CEO came along and spent half on his pet products while leaving the sole responsibility for moving product with the buyer. General Merchandising Managers and Divisional Merchandising Managers also spent big chunks of the "buyer's" budget. In the end the buyer played the part of the manager and got stuck with total responsibility for other people's decisions. ROTFL.

The Christmas season generated half of the revenue and two thirds of the profits for May. They essentially put down a big bet each year on what they thought customers would buy. Apparently they lost a few bets and got bought out by Federated as a result.

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Coral Ridge Ministries, proclaiming truths that transform the world.

[Grampa Dave]

That was the old system of buyers buying what the buyer knew re what customers needed for Christmas or whatever.

Yesterday, my wife didn’t work, and I emptied out our Ridgeline, filled it with gas, and put on my chauffer’s hat to drive her around for her Christmas Shopping.

The day was filled with stores trying to sell what they wanted instead of what we wanted.

Our DIL wanted a heavy duty stewpot, not in red. Linens and Things only had complete sets not individual items. The clerks complained that no one wanted complete sets of cookware. Customers wanted to buy individual pieces of cookware. However, their management in their infinite wisdom only bought complete sets for Christmas.

After a few more failures, I suggested that we go to the Macy’s in the mall. They had tons of complete sets. However, hidden in the back of the kitchen supply area were a few of the large stew pots. I found one, and it was exactly what our DIL wanted.

As we were checking out, I asked the clerk how Black Friday went. She said it was terrible with many less buyers than last year. I said maybe the ads showing the big timers like Trump and Martha, the little consumer couldn’t relate. The clerk agreed.

Then I asked her why only complete cooking sets were in the front, middle and sides of the area with individual items hidden in the back. She said that was management’s decision, and it was costing them sales. They only had two clerks working and they were at the registers and not available to help custormers. My wife would have walked out without a purchase if I hadn’t looked around and found what we wanted.

Next is my favorite response from a clerk or store manager before that store goes out of business, “We have been getting a lot of request for that product!” Of course due to management, we haven’t ordered it, nor will we.

I wanted a couple of all wool non-dress sweaters for fly fishing. Eddie Bauer, where I had bought my current and old sweaters a few years ago, only had cotton or some man made fiber. Cotton is terrible for fishing or hunting if it gets wet, and the man made fibers are like putting on a garbage sack due to lack breathability of the fabric. Again, we heard, we are getting a lot of calls for that. I told them that was the same response we got from their store in Walnut Creek before it closed due to lack of business. The manager just glared at me.

Then we tried to find a new fishing watch for me. One is made by Casio and readily available on the internet. My wife still prefers to buy from a store. Big 5 had the same response, “We get a lot of calls for that.” Only my wife and I were in the store, and I told the manager, “I hope your resume is up to date!” He just grinned, and said he had zero control over what his regional manager sent him re inventory.

A positive experience was at a Build a Bear store. Where the manager found what our grandson wanted, added more stuffing and a couple of other things our grandson wanted. Then, she split the value of the bonus gift card in half between two cards so his sister would have one. The store in their area refused to do this.

On the way home, my wife told me to get the order numbers of what I want and the phone numbers, and she would order by phone. She is still a luddite when it comes to internet buying.

A prime example of this buyer arrogance deals with charcoal for our outside charcoal cookers. In California, many of us use our Webers, Char Grillers and other outside cookers 12 months a year. Yet the know it all buyers for most chains stop buying charcoal at the end of summer. Home Depot which is becoming totally deficient in helping customers, for some reason stocks Charcoal year round with good prices.

[Milhous]

Thanks for your most interesting post. FWIW Cabela's offers lots of apparel along with stocking stuffers like this Gatling Gun Kit LOL.

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Coral Ridge Ministries, proclaiming truths that transform the world.

[Milhous]

By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find and as a result of course, consumers won.

The remarkable thing about Bronfman’s admission is that the music industry considered what they were doing, in trying to limit consumer choice, to be a war.

The media-at-war meme just popped up on AJR.

The staffers know what's going on. They know what's lost, whether it's subject beats that are abandoned, cities and towns and neighborhoods that are ignored or enterprise pieces and investigative reports that never surface because there isn't enough reporting firepower to make them happen.

And don't think the readers don't know when they're getting a product that's thinner both in terms of newshole and heft. All the spin in the world can't hide that.

The "do more with less" silliness is bad enough when it comes from other industries. But it's particularly appalling when it comes from people who are in the truth-telling business.

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Coral Ridge Ministries, proclaiming truths that transform the world.

[abb]

A prime example of this buyer arrogance deals with charcoal for our outside charcoal cookers. In California, many of us use our Webers, Char Grillers and other outside cookers 12 months a year. Yet the know it all buyers for most chains stop buying charcoal at the end of summer. Home Depot which is becoming totally deficient in helping customers, for some reason stocks Charcoal year round with good prices.

Another Pleasant Valley Sunday
Charcoal burning everywhere...
The Monkees

[TenthAmendmentChampion]

Great thread.

[SierraWasp]

Great post by a great rantin and ravin Grampa!!!

[MrEdd]

Maybe we can get Jim Robinson to find a line of good quality wool clothing (with herringbone tweeds) for the Freepathons.

I used to get things from Land’s end, but their offerings have become much sparser. How about a herringbone tweed coat with the pajama patrol crest embroidered on it?

[RayChuang88]

What you just wrote in your long and excellent posting shows why any store that CARES about their customer and what that customer really wants will do strong sales this holiday season. And you wonder why the Apple Store has done extremely well--they go out of their way to ensure a good shopping experience.

Your experience explains why the big Internet online stores like Amazon.com and Buy.com are doing very well this holiday season--they're not tied to the whims of the local buying manager.

[Grampa Dave]

Amen, Brother Ray.

What I ran into yesterday and other days, is the impact of buyers out of this region and contact with our needs. They buy and stock their stores with products with no demand and then blame the economy, GW and of course, us the dumb consumers.

[Grampa Dave]

I’m a kept man, and my wife buys my dress suits,
tuxes/dinner jackets, sport coats, slacks at Nordstrom, and we get what I/er she wants.

What I’m running into is the lack of good outdoor clothing for fishing the seasons in N California and SW Oregon. Our older son runs into this problem for his hunting clothing needs and the younger son re his bicycling clothing needs.

We seldom buy locally because of the lack of good inventory and buy our outdoor clothing from Cabelas and outlets that specialize in hunting and bicycling clothing. The 3 of us drop a good bunch of change at Cabelas each year. They are buying their work clothes like Carhart at Cabela’s because of better selections.

I hope that Jim doesn’t mind me wearing my fleece in the winter time when I log onto Free Republic. :)

[Grampa Dave]

Thanks, for the Cabela’s suggestion. I have been a Cabela’s customer for decades, and a Cabela’s club member since they came out with that program.

Both of my sons buy gear and clothing from Cabela’s and real work clothes like the Carhart brand.

The 3 of us have Cabela’s gear that we bought 2 decades ago, and it still works or wears.

I stopped using my Orvis and Eddie Bauer credit cards about a decade ago.

[BOBTHENAILER]

will be ripped to shred by competition.

They have been and will continue to be. Any business that does not realize that change is a dynamic of equal importance to any component of a business model, is a business that will sink like a stone for ignoring that one dynamic.

[Grampa Dave]

Amen Brother Nailer: Any business that does not realize that change is a dynamic of equal importance to any component of a business model, is a business that will sink like a stone for ignoring that one dynamic.

When a successful business/company gets into the status quo and prevent defense instead of researching what is really needed, they have started the end of that company.

Then, the poor management blames government, world trade, consumers, GW and anything they can think of to blame for their failure.