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Why the Music Business Needs a New iTunes–Or Something: Universal Music Sales, Profits Drop Again

September 1, 2010 at 5:28 am PT

As Apple (AAPL) gears up for its music-themed event, a reminder of how the music business is actually doing: Not too well. At least if you use the world’s biggest music company as a proxy.

Universal Music Group just reported a sales increase of 2.8 percent in the last quarter. But if you adjust for currency fluctuations, the company, owned by France’s Vivendi conglomerate, saw sales drop 3 percent. Meanwhile, cash flow, measured via EBITDA, dropped no matter which metric you want to use –either by 9.9 percent or 17.3 percent.

The slightly good news is that Q2 was less bad for Universal than Q1: For the first half of the year, sales were down 5.4 percent (or 7.9 percent) and EBITDA declined by 24.6 percent (or 28 percent).

What happened? The same thing we’ve heard for the last decade, according to Vivendi’s press release: Digital revenues are up, but not enough to counter “reduced demand for physical product.” Perhaps an iTunes overhaul can help….

Tagged with: Apple, earnings, EBITDA, entertainment, Internet, iTunes, MediaMemo, music, Peter Kafka, Q1, Q2, software, Univeral Music Group, Vivendi

comments so far. Add yours.

http://www.marketingtactics.com/ davebarnes

@Peter,
“the music business” is way more than selling recordings of songs.
It is also: live performances (aka concerts), selling related goods (e.g., T-shirts), etc.
The MUSIC BUSINESS is doing fine. The “selling of recordings” business is not.
http://www.facebook.com/abugida Tom Ross

Money is shifting to live concerts and other forms of entertainment. What the music industry should do is:

a) Stop raising song prices. 99¢ was a great price point.
b) Stop dabbling with free ad-based offerings and other bs just to hurt Apple.
c) Make iTunes-like integration a priority for Android, Blackberry and other mobile operating systems. Help the phone companies, pay their development bills, like Google and Microsoft are doing right now to push their own interests. Just make it work seamlessly, like iTunes and all the new app stores.
d) And finally, keep firing all those people that are occupied not with the product, but with your old distribution channels.
Anonymous

how about the fact the product they are pushing is garbage…. and this is just the tip of the iceberg, as the networks are seeing shrinking numbers, and the fact you can torrent any new show on cable doesnt bode well for them….. all the majors are doing at this point, is re-arranging the chairs on the titanic…..
http://twitter.com/lollipoprecords Lollipop Records

The music industry does need a new itunes! In our consulting practice we are constantly recommending a simple solution. Why don’t the 4 majors get together and launch a digital download service that will cater to not only their artists, but indie artists as well?

On a very basic level they could be saving $573,423,000 (based on 2009 numbers). This figure is the amount iTunes would have been paid if they captured 100% of the music download market at their usual rate of 30% per sale. That is a significant boost to any company’s bottom-line, regardless of their size.

The simplest solutions are being overlooked! Believe me, there are other recommendations we make during our consultations with these guys, but they just don’t get it….

Regards,
Benjamin Wade Inman
Lollipop Records
Nashville, TN
http://twitter.com/lollipoprecords
http://www.facebook.com/pages/.....559?ref=ts