CD/DVD Package...

[From Billboard]

Labels Turn To Bonus DVDs To Drive CD Sales
By JILL KIPNIS AND MARGO WHITMIRE

December 07, 2002

LOS ANGELES - As record companies struggle to rebuild consumer interest in purchasing CDs, they are looking at combined CD/DVD packages as a way to add value for consumers and combat piracy. In some cases, the combo packages are simultaneously offered as limited-edition collectibles with a CD's release; in others, the CD/DVD is introduced later to boost sales.

As Atlantic senior VP of marketing Vicky Germaise puts it: "At this point, we're willing to stand on our head for people to buy our product rather than steal it."

Retailers are sometimes at odds with labels regarding how to best serve the market with such projects, especially if the CD/DVD is issued after the CD-only version has been released. While labels say this strategy is a response to consumer demand, some retailers contend the titles rip off core fans who already purchased the CD-only version.

Both sides agree that releasing CD/DVD packages with the initial run of an album or as a separate limited-edition piece when a project enters the marketplace is a positive, growing trend that gives consumers more for their music dollar—and provides an alternative to unauthorized downloads of tracks leaked onto the Web.

Atlantic is one of several labels that have opted to release CD/DVD projects after an album has already met with some success. The company issued a CD/DVD edition of the P.O.D. album Satellite in August, almost one year after its original September 2001 street date.

Retailers stress that this strategy pits them against loyal fans of an artist who have probably already purchased the album in its original form. "There is the potential that we might piss off the fans who might have bought it in the first place," says Vince Szydlowski, senior director of product for the Los Angeles-based Virgin Megastores chain.

Arista VP of sales Carolyn Wright confirms that there has been negative reaction from retailers when such projects enter the market. The company has just issued a new CD/DVD version of Pink's M!ssundaztood (Nov. 26). Pink's original CD-only album hit stores in November 2001. Wright says, "There is some negative feedback about issues of dual inventories."

Germaise admits that for diehard fans, this release strategy is "almost a dirty trick"—although that effect is unintended.

In the case of P.O.D.'s Satellite, Germaise says the CD/ DVD package was meant to serve as "a precursor" for the band's Still Payin' Dues, a longform DVD released in November. "The people that don't want to go buy the album again, nine times out of 10, they are going to be able to purchase a longform DVD. Additionally, in many cases we will make at least a portion of the content on the [DVD] disc available on the artist's Web site. Usually the artist insists upon that, because they don't want to pull a fast one on their fans."

Wright says the release of a new version of Pink's project came in reaction to consumer response to the artist's "Family Portrait" music video. She explains, "We came up with the idea of, 'This is going to be a big single through the holidays.' We could sell another million Pink albums and give the consumer the chance to make a decision.

"[Consumers] will have the opportunity to buy either," she continues. "If they want the DVD version, which has four videos, they'll have the option to buy that one at a slightly higher price." The new Pink package lists at $21.98, while the original version is $18.98. Like all such projects, each version has its own bar code.

Some at retail say this is just too confusing. "I recognize that labels are trying to capitalize on post-street-date marketing," says Kevin Cassidy, senior VP of retail operations/North America for the West Sacramento, Calif.-based Tower chain. "But it is difficult to sell post-street date when you're talking about a collector who may have already purchased the audio piece."

Still, labels say consumer reaction to these releases has been positive. For example, the updated CD/DVD version of Satellite scanned 30,000 units in its release week, according to Nielsen SoundScan. The regular, CD-only edition sold approximately 14,000 units the week before. The title also moved from No. 84 on The Billboard 200 to No. 36. (Nielsen SoundScan data and Billboard charts do not differentiate between two versions of the same title.)

In another example, a special CD/DVD package of Incubus' Morning View (Epic), which streeted Oct. 1, sold 19,000 units in its release week. Its CD-only counterpart (released one year earlier) was moving 8,000 units in previous weeks, according to Nielsen SoundScan. The project leapt up The Billboard 200 from No. 139 to No. 58.

Given the declining sales of music albums—overall unit sales dipped 9.1% in October compared with the same month last year, according to Nielsen SoundScan—these numbers speak highly of the effectiveness of issuing CD/DVD packages after a project's initial CD-only release.

COMBATING PIRACY

Labels and retailers alike believe that offering these packages is a way to stave off the rampant rise in Internet downloading and CD copying, as these editions add more value to a CD purchase.

While this tactic has less impact when a CD/DVD project is released after a CD-only version is already available, labels feel the updated product can broaden an artist's fan base through record-store sales. "With P.O.D., we waited until the album was triple-platinum to do this [CD/DVD]," Germaise notes, "so the most active audience, who is also the most active downloading audience, probably [downloaded] the initial release. The most important thing is broadening the audience's total involvement with the artist."

The strategy best applies to CD/DVD projects that street on a title's initial release date, labels say. Interscope head of sales and marketing Steve Berman says, "We feel that with every artist we have done this with, we get quicker penetration into the market, and we feel that helps us with respect to bootlegging and Internet piracy."

Initial shipments of Interscope artist Eminem's June release of The Eminem Show was a CD/DVD version containing 45 minutes of visual material. Szydlowski points out that with this project, "there were concerns that it was already out there being burned. Having that limited edition with the DVD helped propel that album. It creates importance around a piece."

This "importance" factor is often cited by labels, in reference to both downloading and CD copying. "When you have CD burners going fast and furious across the country and you have bootleggers selling counterfeit versions of the CD," Wright says, "then you have to give [consumers] something that they can't get by making a copy."

Artists agree that adding a DVD is an effective method of combating unauthorized music sources. "This is a positive way to move fans away from the Internet," says the Donnas' Torry Castellano, known as Donna C.

The first 73,000 copies of the Donnas' latest project, Spend the Night, released in October by Atlantic, contain a DVD with "making of" album footage and music videos. "We really wanted to make sure [the DVD] was fun for our fans," she adds. "Our old fans, of course, really like it, but it's about what is going on now, so new fans can appreciate it too."

A DVD STRATEGY

In addition to boosting CD sales, labels are looking to CD/DVD packages as a way of satisfying—and profiting from—the growing ranks of DVD fans. The Los Angeles-based DVD Entertainment Group says that upwards of 20 million DVD players will be shipped this year (up from about 17 million total shipments last year) and estimates that half of U.S. homes will have the capability to play DVDs by the new year.

"DVD is the fastest-growing entertainment technology in history, and the desire for people to have programming for their DVD players has grown dramatically," Columbia Records president Will Botwin says. The label released a CD/DVD version of Dixie Chicks' album Home Nov. 26; a CD-only version streeted in August.

Labels and retailers also say that including a DVD with a CD album is a way to better compete for consumer dollars. RCA senior VP of marketing Dave Gottlieb says the music industry "now has to compete with a generation of consumers who think that there's a lesser value to music. We have to show people how much of a value they get from a CD as opposed to a book that they buy for $20 and only read once."

Amazon.com senior merchandise manager Jeff Somers says that customers are often confused by pricing. "When they see an $18.98 price tag on a single CD product and they see a $19.98 or a $15.98 price tag on a brand-new DVD, the question they ask themselves is, 'What is the value here?' Customers today are faced with more choices on entertainment expenditures. "

CONTENT IS KING

Industryites say the choice of a CD/DVD package as opposed to a CD-only album must be clearly defined for the consumer. When two formats are offered on street date, as with George Harrison's Brainwashed (Capitol, Nov. 19) and Whitney Houston's Just Whitney (Arista, Dec. 10), packaging and price differences are always clearly marked. (The CD/ DVD packages are usually more expensive than their CD-only versions—Houston's special edition lists for $22.98, while the regular album is $18.98.)

This same clarity is necessary for limited-run CD/DVD packages, which are later replaced by CD-only versions when shipments run out. Prices on Foo Fighters' One by One (released in October by RCA), whose first 575,000 units include a bonus DVD, and Sum 41's Does This Look Infected? (just out on Island), also initially available in limited supply (Billboard, Nov. 30), are the same as the later-released album.

Wright says that a sticker is always featured on CD/DVD packages and that retailers typically merchandise both versions side by side so consumers can see their choice. Each version of a project also contains a separate SKU.

Regardless of how a label decides to release a CD/DVD, companies recognize that the content on the DVD must be compelling and reflective of the act.

Island head of marketing Livia Tortella notes that its Sum 41 CD/DVD is "a combination of live concerts and behind-the-scenes stuff just because that's part of who they are and what they do."

The Strokes' Albert Hammond Jr. says that the new CD/DVD version of the band's RCA album Is This It was created to highlight strong music-video material. "We had some good videos that weren't shown on MTV," he says. The original, CD-only version of Is This It was released in September 2001.

With all the CD/DVD packages being offered, there is concern that fans will come to expect these bonuses. "It certainly is a monster that we created," Germaise observes. "There are production costs in authoring the DVD, creating the menus, extra packaging, and extra shipping costs." Tortella says that creating a DVD disc can cost upwards of $60,000.

Not everyone is worried that demand for CD/DVD packages will become unwieldy. "I think it will continue to be used on the right things," Gottlieb says. "At the same time, I think there will be a point where the consumer goes, 'Eh, it's not that special,' and we'll have to come up with something else."

NEWSFILE: 30 NOVEMBER 2002