Value Vs. Price: Q&A With NPD’s Russ Crupnick

More than ten million people stop buying music each year, Russ Crupnick told the Leadership Music Digital Summit last week, and two-thirds of non-digital buyers don’t have any interest in buying digital. They simply wanted good value in music and feel they weren’t getting it. Crupnick knows what consumers want. He is VP, senior industry analyst at the NPD Group, a Long Island-based provider of retail and consumer market research. He first looked at the value-versus-price issue for a 2002 NARM conference presentation. In a conversation with Billboard, he talks about how the industry failed to hear consumers’ plea for more value and how artists and companies can tackle the problem now.

In your 2002 NARM presentation you were looking at price versus value, which was a big topic in your discussion today.
We knew the age of digital downloads was upon us even though it was a year before iTunes. We were deep in piracy, which wasn’t nearly as bad in 2002 as it became later. I think there was a general concern that the only way to save the CD is to drastically drop the price. (NPD) started out neutral and saw what the information said and we disagreed. The actual analogy I used was, “If you want something cheap, get a Yugo. If you want something valuable, get a Volkswagen Beetle.

People who were spending a lot of money on CDs at the time—$15, $16— as long as the CD was decent and had 3, 4, or 5 tracks they liked and was from an artist they had a reasonable amount of connection. The consumer was OK with those prices. What seemed to really irritate consumers was the, “I bought this thing and it has only one good track. What I heard on the radio is what I got on the CD. I’ve got 11 or 12 tracks of filler.” That irritated consumers.

If radio continues to be such a main method of discovery, people will look for that album with the song they know. Are consumers getting around this problem of buying albums with one good track? Of course, now they have an option not to buy entire albums.
I think two things happened. You had some consumers who said, “Fool me once, shame on you. Fool me twice, shame on me.” That’s one of the reasons a lot of consumers started saying, “I’m tired of things with one or two good tracks.”

On digital—let’s leave piracy aside—ou had a lot of other consumers that were saying, “If I just want that one track, now a year or two later I have options for getting it. Especially for artists I don’t yet trust, that I don’t have any affinity with, maybe I’ll want to do that.”

So if consumers can buy single tracks instead of albums, then the onus should be on record labels to put out albums with top to bottom better music, right?

I think better music is one of the things that got lost. You would hear somebody say, “We signed somebody who spent their whole life on one song. We signed them to a contract, we put them in the studio and we found out all they had was that one song and the other ten songs were sub-par.

Some of it is the responsibility of the music. But I think today there are people who are willing to spend more, whether that’s a digital album or CD or something else. I’m just not sure we’re optimizing that opportunity with them.

When you talk about providing more value instead of simply cutting costs, what goes into adding more value?
It depends very much by the artist, by the genre and by the individual. For some, adding value is (getting to) three, four or five tracks that are pretty good on the album. For some it can extend all the way to bonus packs and enhanced experience, whether that includes videos and photos or what EMI did with the Beatles thing where you got a little crate with a T-shirt on the Abbey Road re-release.

The answer varies. You have some artists who tour. There could be a concert component. A lot of consumers say, “How about a CD/digital combo?”

We’ll see if it works, but take the genius of Disney. They realized with Blu-ray that most of us don’t have Blu-ray players yet. If we do, we have Blu-ray players in one room. It’s going to change because Blu-ray players are going to become less expensive, but go back a year. We have them in one room, we don’t have them in the Plymouth Caravan and there may be a teenager who likes all digital stuff. So they came up with something called the Combo Pack. I get a DVD I can play anywhere. There’s a Blu-ray that goes in the media center. And there’s a digital download.

Let me also be clear. There are price thresholds. Consumers said the music at f.y.e. is too expensive. I’m not suggesting that we can go back to 1999 retail prices. But I think within a reasonable band consumers are willing to accept the value of that. It can’t be perceived as being overpriced.

Prices have come down. But square footage in stores has come down. The number of retailers has come down. So in these numbers you’ve shown of people who have dropped out of buying music – and it’s going down more than 10 million a year – do you have any indication who is giving up on music and who is being affected by this supply problem?
Let’s leave out online streaming, which is going to change the paradigm, and talk about 2010. I think it’s two things. You do have a lot of people who are very satisfied with the music they’ve collected over the last ten, 15, 20 years, depending on their age. Discovery is less important to them. I think the challenge with them is – the story I tell is every time my wife changes her car, the same six CDs go with her. So you can imagine since I met her in the ‘80s, she’s probably had a bunch of difference cars and the same Jackson Browne, Elton John are there. Now, these are artists who have put out product over the last 20 years. But we’re not motivating people like that to add to their collections.

If you went into the store to buy CDs during the kids for the holidays, you’re in the section and if you saw the new Jackson Browne or Elton John or whatever, you’d pick it up for yourself. Now that you’re not in the store for the kids – because they’re on Pandora or you buy them an iTunes gift card – a lot of people aren’t making it into the section. The sections get smaller. There’s less of an incentive to go into the music section. I think that’s part of it, this satisfaction and apathy that has been created.