Industry Insider: Jim Donio - EMusician

Industry Insider: Jim Donio

THE PRESIDENT OF A MAJOR RECORD-INDUSTRY TRADE GROUP ASSESSES THE FUTURE
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Many musicians are unfamiliar with NARM — the National Association of Recording Merchandisers — and its annual convention. Yet that organization and event are responsible for launching many well-known acts. I know from personal experience: I was playing guitar with Hanson at the 1997 convention, which was our major-label debut. It was our opportunity to show trade members exactly what the group would soon sell to millions of teenagers worldwide.

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Jim Donio is the president of the National Association of Recording Merchandisers

Photo: Courtesy Jim Donio

I recently had a chance to speak with NARM president Jim Donio, who's been with the organization for 21 years. He offered his insights into the complex and ever-changing record business and the role of the organization.

What is NARM's mission?

We provide an intersection between content, commerce and consumers. NARM has changed significantly over the past decade due to how people discover and acquire music, and determine whether they will own it forever or just experience it. Therefore, dynamics shifted because of who is involved in the association. We're unique in that as members, we have labels, distributors and others on the content/supplier side, but now the commercial community has really diversified. There is everything from independent stores and small entrepreneurs — online and offline — up to iTunes, Amazon, Best Buy and AT&T.

It's a very different NARM than when you performed here. In fact, iTunes, Amazon, Verizon and Nokia are on the board. If you even suggested to me six months ago that we'd have two mobile companies on our board — the sheer speed of change in the industry has made that happen quickly and now such companies have a strong voice in how content is delivered to consumers. The core mission remains the same: to support all aspects in the industry to advance the business of music, and to have music be a viable, fruitful and profitable enterprise, however consumers pay for it. Of course, the unspoken goal is to make sure that people pay for music and that there is a way to help the industry monetize the various experiences that people can have with music.

Nielson/SoundScan reports digital album sales up 26 percent this year, yet 77 percent of albums purchased are physical — perhaps the operative words are “albums” and “purchased.” Moreover, vinyl is making a comeback, having grown 90 percent in 2008 over 2007, and being up 65 percent in the first seven weeks of 2009 over 2008 with an estimated 2.8 million sales in 2009. Will it ever just be downloads or streams?

Some people will want physical product; others will want virtual, digital or online purchasing experiences. Some will just want the experience, and the monetizing will be [based] around that in terms of concerts, merchandise and so forth. I don't see the industry vertically with physical stores at the bottom and “cloud experiences” on top, but horizontally where any consumer at any time might choose a physical manifestation, digital manifestation, a combination or just an experience — one where they would not actually own anything, but be willing to pay for that experience or something around it. That can be a stream, social media platform, music video model that can be monetized through views or advertising around those views and so on.

At the core, it circles back to the art form itself. For some, it goes back to wanting to own that music and support the artist or the art itself. They may just love a genre irrespective of the artist — jazz, soundtracks, et cetera. Will there ever be a point without a physical manifestation of music? I don't think so. Look at the resurgence in vinyl. It won't replace the CD in numbers, but when you look at the growth and how companies like Best Buy are going to experiment with vinyl, there will always be a segment interested in collectability. Even if they never listen to vinyl, it may be bundled with a digital album card or CD and they'll play the CD, but love having the vinyl as the collectable manifestation of the art. It doesn't feel “disposable”; music isn't homogenous, it's not a one-size-fits-all product. Now with all these choices — physical, digital, mobile, streaming, subscription, a la carte and any combination — why would we suggest that people will want to do 100 percent of one thing?

So the CD is here to stay?

I think for many years to come, but we'll reach a point where digital and mobile probably begin to eclipse it. There will be a balancing out, and for certain artists and genres, you will want the totality of the music. Jazz, soundtracks and cast recordings are very tied to the experience of a performance, so I don't see an elimination of CDs for certain genres. Looking at the tween generation — a manifestation of TV shows, movies, brands, dolls and whatever goes along with that — I think you may see more unique bundling. What constitutes an album? There may be a new name or modeling where you get a physical manifestation of the music — perhaps you purchase a T-shirt or doll and get a digital album card or CD as part of that bundle. It will be a choice you make as opposed to CDs being the only choice.

What about the future of digital distribution? Should artists place most of their efforts there? Does TuneCore replace the need for conventional distribution?

Equate it to the economy and your 401k: Be diversified. This isn't a time to do one thing in one way. Maximize a whole range of opportunities, and, depending on the artist, project, timing, et cetera, allocate the appropriate resources and marketing approach. Even more so than physical, which has certain limitations, digital distribution is only limited to the innovation and ingenuity of young people already tinkering with something we haven't even contemplated and by our ability to execute it. However, country music, for example, is a huge genre that is nowhere near the digital and mobile numbers of some others, yet it speaks to a large consumer demographic that's still pretty attached to the physical manifestation and probably will not migrate from that as quickly. There are many models that will need to be tested over this period, and the consumer is in the driver's seat.

So much choice, but I think there will always be physical stores and distribution. We're a culture that likes to shop, and you can see the cultural and economic role these businesses play. People love being immersed in that experience and need to be reminded what that has meant and does mean to them. Artists need to come out and speak about that too. Online, you can't replicate being in a store or the parking lot with a new, established or superstar act that is communing with fans, taking pictures and signing autographs. Balance is important. There are enormous benefits and opportunities in digital and mobile music. On the other hand, I'd be concerned if I thought we were going to eliminate human contact from the experience and not have fans commune with likeminded fans for those who want to.

Is piracy an increasing problem despite the industry's efforts to fight it? Is the current economy making it worse?

It's a huge problem and has impacted the industry for a decade. Those losses cannot be replaced, which is really unfortunate for the artists, songwriters, retailers and everyone in the channel. It's stealing — no different than going into a store and saying you like a pair of shoes so you just take them. Someone made those shoes and their livelihood depends on it. It's no different from writing a song or making music and depending on it. The industry confronts this in myriad ways; consumer education and legal approaches have been taken. The lawsuits against consumers were spun negatively, but they did provide a heightened sense of awareness for millions of people who were probably never touched by it.

In terms of shaking people to understand a very difficult point, it wasn't an easy step for labels, and they'd probably be the first to say it wasn't perfectly executed. Certainly, the current economic impact of having less discretionary funds might cause people who never thought about burning a CD, or downloading illegally, to move to that behavior.

Speaking of record labels, do they have a future?

Both independents and majors bring resources that are absolutely necessary and will continue to evolve. While a major-label engagement may not be necessary or appropriate for every artist, the role of all types of labels is important in that there is financial, creative and strategic support that is very valuable in discovering, nurturing, defining and developing careers.

Ravi (www.HeyRavi.com), former guitarist of three-time Grammy-nominee Hanson, tours the country performing, lecturing and conducting guitar clinics. He writes for several magazines, and Simon & Schuster published his tour journal.