LA Times: Elvis GH package (slightly FM-related)

[Les]

For those interested, more insight into the quagmire that is the music industry:

LA Times
August 5, 2002

Elvis Poised for Latest Comeback
The King is the latest bygone act whose hits are being mined for profit.

By JEFF LEEDS, Times Staff Writer

One of this year's best-selling albums is likely to come from a Mississippi singer and onetime delivery truck driver toting a radical sound and wicked dance moves. But he won't be touring—Elvis Presley has been dead for a quarter century.

Next month "Elvis: 30 #1 Hits" will arrive in stores, backed by a $10-million marketing blitz that runs from a network TV special to random "Elvis sightings" on the Internet to a traveling exhibit of items, including the late singer's karate uniform, borrowed from his Tennessee estate. Bertelsmann, the German conglomerate that owns RCA Records and the Elvis Presley music catalog, hopes to sell 10 million copies of this collection of hit singles.

With the album's release, RCA joins a growing list of music companies that are betting big on the past as sales of their new acts' albums continue to plunge. Many are dreaming of duplicating the recent eye-popping success of the Beatles' "1" CD, a compilation of hit singles that has sold 23 million copies worldwide since British music conglomerate EMI Group released it two years ago. But major record labels, which long viewed archive sales as an afterthought, also are rushing to generate profits from their decades-old music libraries before digital piracy in the Napster era threatens their value.

Last year album sales in the United States, the world's biggest music market, declined 3%, the first drop-off in a decade. And so far this year music sales are down an additional 10%. Meanwhile, blank CDs that can copy music downloaded from the Internet are flying off retail shelves. Blank CD sales are expected to jump nearly 40% this year to more than 1.2 billion units, according to the Consumer Electronics Assn.

Record companies are reeling from the market shifts. Universal Music Group, the world's biggest record conglomerate, said operating income for its most recent quarter plunged 61%. Sony Music Entertainment, the second-biggest music company, recently reported a quarterly loss of $86 million, compared with a $37-million profit a year earlier. So major record labels are scrambling to cut costs and create blockbusters cheaply.

Catalog sales have long been crucial to record labels. In the music divisions of AOL Time Warner Inc. or Sony Corp., as much as 65% of their annual profits have come from catalog sales and the licensing of songs from their libraries, sources say.

Indeed, a record company's value hinges in part on the size and quality of its music library. That's why labels demand ownership of the master recordings when they sign artists to long-term contracts. A big label like Warner Bros. or Columbia may have 125 current artists on its rosters and release 60 new albums per year, of which only five or six will turn a profit. But the label's parent company may hold the master recordings of thousands more artists in its vaults.

Repackaging older artists' work is typically cheaper than financing a new act's concert tour, filming music videos and paying for radio promotion. As a result, labels often earn profit margins twice as large on catalog albums compared with successful new albums.

And in the case of the new Presley album, RCA has an added edge: It doesn't have to give the Presley estate much of the profits. In 1973, Presley and his manager, "Colonel" Tom Parker, accepted a $5.4-million payment—which they split—and agreed to forgo future royalties from the singer's recordings made until that date. As a result, Presley's estate has not profited from much of his worldwide album sales for nearly 30 years. In exchange for providing photos and artifacts on the "Hits" album, however, Presley's estate will be a "participant" in sales of the album, sources said.

Bertelsmann Music Group, long a money-losing division, expects brisk sales of the Elvis collection to help it generate a $100-million operating profit this year.

At BMG, often criticized for failing to develop its catalog, the Presley archive is a sore point. Record executives inside and outside the company say it has flooded the market with a hodgepodge of low-quality Presley compilations and failed to steward his legacy as rock 'n' roll's first superstar. In the last decade Presley has sold more than 18 million albums in the U.S.—heavy volume, but well behind the 28 million sold by the Backstreet Boys or the 54 million by country singer Garth Brooks.

"There's been so much Elvis catalog in the market, I think it was mismanaged," said Joe DiMuro, senior vice president of strategic marketing for BMG, who is leading the Presley campaign.

But mismanagement is part of the Presley mythology.

Executives still marvel at the decisions made by "Colonel" Parker, the carnival promoter who took Presley under his wing after meeting the singer in 1954 as Presley was gaining popularity. Parker then went on to negotiate the sale of Presley's early recording contract with Sun Records to RCA and obtained some of the biggest paydays of the time for his client.

But Parker, whose "colonel" rank was an honorary title bestowed on him by the governor of Louisiana, was criticized for pushing Presley into a string of mediocre films at the expense of his music, badly misjudging the singer's talent and for allegedly cheating his client to finance his gambling addiction. Presley died at the age of 42 from a heart attack 25 years ago next week. Parker died in 1997.

For the "Hits" blitz, BMG received some help from Walt Disney Co., which licensed six Presley songs for its animated film "Lilo & Stitch," and from Nike, which used a remix of an obscure 1968 Presley tune, "A Little Less Conversation," as the soundtrack for an estimated $100-million TV ad campaign during soccer's World Cup.

RCA is now promoting the song to pop radio stations and plans to include it on the "#1 Hits" compilation, which is dominated by earlier hits such as "Jailhouse Rock." Bertelsmann also is pushing Presley through its Random House division, which is publishing three new Presley books, and has cut deals with online services such as Lycos and America Online, where animated photos of Elvis riding a motorcycle or swiveling his hips will appear.

RCA has been trying to learn from EMI's success with the Beatles' "1" hits collection. EMI had sold millions of Beatles compilation records and outtakes in recent years. But the company then embarked on consolidating a package of the band's No. 1 singles.

To market the album, EMI's Capitol record label and the Beatles' Apple Corps targeted an audience of young teens and kids. EMI purchased TV time hyping the Beatles album on kid-oriented outlets such as cable TV's Nickelodeon, and shifted away from traditional record stores to promote it at Wal-Mart and Target, which tend to stock hit albums sought by younger consumers. The record company also timed the Beatles CD release for the holiday season, aiming to set it up as a go-to gift.

The album's success helped create a 14% jump in EMI's profit at a time when the company was otherwise absent from the Billboard pop chart. The explosive sales helped the Beatles earn $31.9 million last year, according to Rolling Stone magazine.

Jeff Ayeroff, an architect of the marketing campaign behind "1," said as more catalog-based releases emerge, record labels run the risk of appearing exploitative. "There's enough in the vaults to create a lot of garbage and enough to create a lot of great stuff," he said. "The trick is take the appropriate road."

But pressure is mounting on record labels to generate sales from their catalogs as the economics of the music business continue to unravel. Record labels, including BMG, are considering overhauling the contract system to cut shorter deals with artists—but that means each label's library would grow more slowly.

Moreover, the rise of file-swapping services on the Internet and CD-burning is threatening to wipe out in a few years the value of the music libraries that labels have built over decades.

Konrad Hilbers, who heads Napster, said during the file-sharing service's heyday, about 35% of the songs copied were older titles or others not available in the U.S. That traffic, he said, represents a promotional opportunity.

"In the movie industry, Disney revised all of its stuff again and again and brings it back to introduce to a new generation of kids. I think that content will reappear and will revive, and the music industry has not seen the beginning of that," Hilbers said.

But several music executives dispute the idea that free file-sharing encourages interest in older material.

Record label executives also worry that they are now selling against the clock. Young music fans weaned on downloading pirated hits may develop an appetite for older material. Yet many retail stores are removing older albums to allocate more shelf space to DVDs and video games, making it harder to get new "old" collections in the stores.

"You are no longer in a world where you can dump out a product, label it 'remastered' and expect it to sell," said Bruce Resnikoff, president of Universal Music Enterprises, the catalog division of Universal Music Group. "For higher-profile catalog releases, the marketing plans today are as intricate as those for new artists."

This year BMG started Heritage, a catalog division that guided the release of Barry Manilow's collection of hits in "Ultimate Manilow," which has sold about 900,000 copies so far.

Other record labels have plans for big-budget collections by the Police, the Rolling Stones and Fleetwood Mac.

Last year, to market Pink Floyd's double-CD "Echoes," Capitol Records pursued an audience of men 35 years and older. It aired some 5,000 direct-order TV commercials on ESPN, Speedvision (now the Speed Channel) and other media outlets, and underwrote the cost of midnight screenings of the band's film, "The Wall." Capitol also handed out eight-song samplers from the album at performances of a touring laser show featuring the band's music. So far "Echoes" has sold an estimated 5 million copies worldwide.

"Putting together these kinds of albums has to be done selectively," DiMuro said. "You can't do it with all of your back catalog. Effective catalog management has been absent from the record industry."

[Johnny Stew]

Thank you for posting that, Les... very informative.

A "big-budget collection," eh? I can't wait until we get more details on this.

(By the way, folks, I think by "big-budget," they mean promotion-wise. I don't think we should expect a revised boxed-set, or something along those lines.)


Johnny Stew