The global music industry is facing hard times. Over the last five years, sales of legal ‘hard copies’ (CDs, DVDs, cassettes and records) have declined sharply, due to the rise of MP3 and iTune formats, as well as Internet downloading. Some of these losses have been partially replaced by legal online sales — amounting to 15 percent of music sales worldwide by 2007, according to figures from the International Federation of the Phonographic Industry (IFPI), but the industry has been slow to grapple with new technologies and the changing consumer mentality. Add to this volatile mix the global economic crisis and a severe credit crunch, and the emerging picture seems gloomy indeed. Yet artists, retailers and producers are not all that pessimistic.
Tony Sfeir is the founding manager of both the retail shop CD-Thèque and independent label Incognito Records. He sees himself as the classic ‘disquaire,’ offering a near-complete knowledge of his products to customers and making it a point to let them discover new music. Sfeir takes his business extremely seriously. In fact, he even closed down CD-Thèque’s second outlet in Hamra when another professional disquaire could not be found.
“You know you have found a real tradesman when people say they bought their music from Raymond, not from the CD-thèque,” says Sfeir, referring to one of his employees. The closure has cost the company part of its turnover, but Sfier believes it has generated credibility, saying “CD-thèque has loyal customers who returned to the original establishment in Ashrafiyeh.” He quotes the 2008 turnover of CD-thèque as around $700,000 — down from $800,000 in 2007 due to the shop closure — estimating this to be 20 percent of the legal sales market in Beirut. He has yet to see a drop in sales due to the financial crisis.
The franchise guys
Anthony Ziade, CEO of the Virgin Megastore franchise for Lebanon and KSA, is equally optimistic about customer loyalty, feeling that Virgin has no real competition in Lebanon on the level of the overall shopping experience on offer. The concept of Virgin Megastore is a combination of music, books, films, multimedia hardware, musical instruments and a cafe. “Music is the anchor of Virgin, it is the first thing you connect with our Megastores, so we will keep selling hard copies – even if they represent only a fraction of our sales volume now.” Music has dropped from over 50 percent of turnover back in 2001 to a mere 15 percent in 2008. This is a global evolution. At Virgin France, music represents only seven to eight percent of total sales volume today and even that figure continues to drop. Yet Ziade is not considering selling MP3’s in the Megastore or through its website.
“I don’t think the Middle Eastern public is ready for that yet, even in Lebanon,” he says. The crisis is not making itself felt in Virgin’s sales yet, Ziade claims. It has, however, manifested on the supplier side, where the retailer is experiencing some shrinkage in its sourcing, as some producers and distributors have gone out of business or face difficulties obtaining credit. Suppliers are also less eager to give credit, demanding upfront payments instead and following up payments very closely. Despite the difficulties, Virgin Megastore has now branched out to Saudi Arabia, where it has taken the retailer some time to get started. The concept of Virgin Megastore is a controversial one in KSA. “We faced many hurdles from the side of the government, what with censorship and related issues, but we are now proud to present a respectable range of CDs, DVDs and books — albeit more limited than in Beirut of course,” says Ziade.
Hady Hajjar, marketing manager of the recording label Rotana Music, doesn’t see the global crisis as a major threat either. “We are not just selling ordinary products. Music is a universal language and people will always need music in one way or another. We have 120 stars in our portfolio, including all the big names in the Middle East.” Hajjar therefore doesn’t see the financial crisis as a major threat, although he admits Rotana has been affected by the global drop in music sales. To counter these losses, the Rotana empire, as Hajjar likes to call it, has been branching out to include management and event organization, as well as a digital department for the sale of ringtones and digital online formats. In 2008, the company signed contracts with Zain and Mediaphone to cover the region. Additionally, it has started licensing out its music to companies around the world in an effort to reach Arab households worldwide, and acquiring licensing contracts from Sony, Universal, Fox and Disney to distribute their music and films through its own distribution network in the region.
New scenes
Although Rotana is an established authority on the Arabic music scene, the company is always on the lookout for new talent, trying to keep its finger on the pulse of the ever-changing tastes of the young. Amanda Hartford manages Rotana Musiqa, one of Rotana’s multiple satellite channels, which features a show closely tracking hip-hop, techno and alternative music in the region. She is fascinated by what’s brewing now in terms of new developments. “Compared to only three years ago, young musicians — whether rappers, DJ’s or rockers — are becoming very professional. Scenes are rapidly evolving, especially in Lebanon, but also the clubbing scene in Egypt and hip-hop in Saudi Arabia, to name just a few.” Rotana has been sponsoring events like the Sound Bomb hip-hop festival in Beirut last fall and while these artists do not fit into any of the company’s formats at the moment, Hartford sees it eventually reaching the point where sub-labels will be set up for the different genres.
Yet questions are cropping up about how open the industry is to newcomers. Rima Khcheich is an up and coming Lebanese singer, who combines her classical tarab training with jazz influences. She has released three albums with the Dutch Yuri Honing Trio. She claims the situation for Arabic music in general today is bad, complaining that only commercial music has a chance to reach the audience, while artists who are working to develop their own voice do not get a lot of chances to produce their music, let alone to get it distributed.
“I produced my own first CD, so production is possible if you are determined, but distribution is another matter,” says Khcheich.
Sfeir feels the key is to create a separate or alternative scene. “With Incognito, we have started from the bottom up and I think that is the key to our success. We started with releasing budding musicians who gravitated around the CD-thèque,” he adds. The shop started publishing a magazine, organizing events and in that way eventually managed to create an interest in the music it wanted to release. The original Incognito label focused on rock and alternative music, such as Scrambled Eggs and Mazen Kerbaj. In 2006, the sub-label New Oriental Sounds was created, which releases classical Arabic music from across the region with a modern touch, in jazzy or experimental interpretations, or blended with a more Western-oriented sound.
This has proven quite popular, to the point where Incognito is now selling between 7,000 and 8,000 copies of its bestselling products. Together with their distribution of other labels, this has resulted in a turnover of $800,000 for 2008. “We are nowhere near the level of something like the Cuban scene yet, which is known and appreciated throughout the world, but we are trying to build a similar name for Beirut internationally,” he claims.
Piracy
Both independents and established companies agree that distribution is the biggest hurdle. In countries like Syria, Sfeir points out, there is hardly a distribution network for the simple reason that CD’s are downloaded and burned on demand in the retail shops — which brings us to the piracy issue.
The Middle East, as is well known, has a reputation for music and film piracy. Rotana’s Hadi Hajjar estimates illegal copying in Lebanon alone at 80 to 90 percent of the market. Ziade agrees, though he estimates that the effect on Virgin Megastore is not a sales issue, arguing that Virgin customers have a certain buying power and prefer the quality and extra features of the original. The issue, he says, is credibility.
“Customers ask us for season 17 of a series like ‘24,’ but we are still at season 12. We follow the official channels and we honor release schedules, whereas the pirated version is already on the market, of course,” said Ziade.
On the other hand, Ziade says he has seen a real effort from the Lebanese authorities in the last year and a half to crack down on piracy, although he agrees there is still a long way to go. Rotana has recently lowered the price of its CD’s drastically to combat piracy sales. Hajjar explains the concept, saying the price of a legal copy is now only a few dollars above the pirate price, as opposed to the previous 10 dollars-plus difference.
“We have also waged an awareness campaign and are moreover making a real effort to bring our CD’s closer to consumers, working not only with our own retail outlets and dedicated chains like Virgin, but setting up distribution to the small local supermarket-cum-fuel station chains,” he says. For smaller labels like Incognito, though, piracy does not have the same effect. Sfeir has no major problem with piracy, apart from the effect it has of impeding the establishment of a distribution network. On the contrary, he sees piracy as a form of promotion, bringing Incognito’s music to new audiences.
“A part of this public will eventually go looking for the original copy, attend concerts, or in other ways contribute to our scene,” concludes Sfeir. As Khcheich sees it, the main disadvantage is that with all the copying going on in the Arab world, “not only can you not count on the real CD selling in most countries, but there’s no way to know even how many you are selling.”
