William W. Wade - Energy and Water Economics

Demographics Undermined Music Row's Pop-Crossover Strategy©

By William W. Wade
Energy and Water Economics
810 Walker Street
Columbia TN 38401
931-490-0060
wade@energyandwatereconomics.com
Draft: June 12, 2001

Trade rags, Business Week (June 11) and the Nashville Scene (June 7) report the demise of Country Music-or more pertinently, Music Row. "Murder on Music Row" is up for Song of the Year at the TNN&CMT Country Music Awards. Fans, who nominate songs and artists for the award, are not happy with what they hear on the radio.

RIAA data show 2000 country album sales continued to slide, down 8 percent from 1998. Country album sales have bounced down hill from nearly 19% of the album market in 1993 to 11% for each of the last two years. (Chart 1) Dollar value sales peaked at $2 billion in 1995 and declined 25 percent to $1.5 billion in 2000. (Chart 2) Executives at Arista and Atlantic can attest that you cannot run a successful business in a market with declining sales.

Why are Country Music sales down 25% since 1995 when total album sales are up 16%? (Chart 3) Gurus and critics talk about homogenized music and loss of roots. I like to check the data. The answer is obvious: Label and Radio executives missed the market. Music Row's pop-crossover strategy is an industry bust--if you're not Shania, Faith and the Dixie Chicks, and their labels.

Programming Country Music for 20-34 Audience is the Mistake

Entertainment industry consolidation brought executives from Movie and TV backgrounds to positions with influence over recording and airplay decisions. "Young Country" became the format du jour. Drawing from their TV and Movie experience, they mistakenly transferred TV and Movie economic drivers to Country Music misplacing the importance of the 18-34 market potential for Country Music. This demographic cut buys 40% of albums, but the segmentation of music tastes among the 18-34 age group doesn't make them the most viable market for Country Music. Competition from other forms of music left less of that 40% for Country Music than Industry leaders anticipated. Demographic changes took the rest.

The White 20-34 segment has been a declining market for the last ten years. Station managers, program directors, and Music Row executives who made "Young Country" recording and programming choices aimed at that critical 20-34 demographic cut failed to anticipate the 5 percent decline in Whites 20-34 in the last decade. Selling anything into a declining market is a challenge. Hispanics were the hot demographic segment in the last ten years. Hispanics 25-34 increased 21 percent. (Chart 4) Not surprisingly, Jennifer Lopez outsells country artists even though she is more of an actor than a singer.

The youngest demographic part (16-24) of the industry's target segment doesn't even buy Country Music. (Well, maybe a little Billy Gilman.) According to SoundScan, Destiny Child's Survivor sold 663,280 units in a typical week compared to a paltry 117,641 for the top country album. Who do you think ran up these sales? R&Ronline says, "Rap/hip-hop music is completely dominant among 16-24-year-olds. In fact, Nelly ranks No. 1 among 35 current artists that this age group is most interested in buying." (June 8, 2001.)

Forecasts show that these trends will continue. Hispanics 25-34 will increase five times faster than Whites 20-34, nearly 25 percent by 2010 compared to 5 percent. (Chart 4.) Salsa is here to stay! The White 20-34 market will remain about static. The 20-34 audience remains a bad bet for Music Row, unless the plan is to crossover to Latin music. Rock and Pop artists will slug it out for a share of the static White 20-34 and Black audiences, while Latin artists will find more and more listeners. Country Music sales will not grow with product pitched to a static market. Music tastes are too diverse and competition is too stiff. "Young Country" never should have been Music Row's primary market concept. It still isn't.

The 45-54 Demographic Segment Spent $3.5 Billion on Albums

Charts 2 and 3 show that album purchases by the 45+ demographic cut increased from $2 billion to $3.4 billion in the last five years--a 72%% increase. RIAA shows that the 45+ segment buys 25% of albums. Makes you wonder how much country music they might have bought if Label and Radio executives had selected artists and songs aimed at the older demographic segment instead of "Young Country!"

Chart 4 shows that the 45-54 demographic segment growth, at 5% annually for the last ten years, more than doubled the 25-34 Hispanic growth rate. This shift in demographic importance partially explains their 350% percent increase in album purchases in the last decade (Chart 2). Album purchases by this segment grew at 15.6% annually during the 1990s-more than triple their population growth rate. This article leaves two unanswered questions about this segment:

1. What they were buying?
2. How much country music might they have bought had the selection and programming of country artists been geared to their tastes?

Market Strategy for the 21st Century

If programming pop-crossover Country Music for the 20-34 demographic segment is a bust, and sales confirm that it is, what's needed? A new Country Music marketing strategy. Luckily, the strategy is obvious: the older demographic segment remains untapped. Country Music sales might have mirrored the 45+ segment's purchases if product had been geared to their tastes. Music Row can still capitalize on this obvious demographic trend. The Baby Boomers are the obvious target market. Those 45+ Boomers, whose increase in record purchases, $1.5 billion, in the last ten years equals the current state of Country Music album sales, are a decade older. They haven't gone deaf with "old age." They won't stop listening to music. Music has unique importance to this Woodstock Generation.

Whites 55-74 will grow even faster than Hispanics in the first decade of the 21st Century, increasing 31 percent by 2010 compared to 23 percent. (Chart 4.) While this segment was smaller in size than Whites 20-34 in 1990-about 30 million-they will outnumber the younger group in 2010--48 million. (Chart 5.) The 45-54 segment, which dominated growth in the US for the last ten years at 5% annually, becomes the 55+ group, which will grow even faster than the Hispanic 25-34 demographic segment, and equal to the overall Hispanic forecast growth. (Chart 6.)

With Entertainment marketing executives in a lather to reach the Hispanic market, it should be a no-brainer to notice that the older demographic market is larger in size and equal in forecast growth. The White 45+ group is a 50% larger market today than Whites 20-34 and will grow to a market 80% larger by 2010. They don't like short radio playlists! And they spend money.

Check out Fan Fair audiences. Baby Boomers' purchasing power is different today than in decades past. Income by Household data show that the older segments, 45-54, and 55-65, dominate the earnings of the younger groups. (Chart 7) Chart 7 shows that 25 years ago the 55-64 segment had incomes akin to the younger segment. In the last 25 years, 55-64 incomes have converged toward the 45-54 group. These two older segments represent people in their peak earnings years. Lifestyles have changed to include more enjoyment of life. Boomers just want to have fun today. 25 years ago they were worried about paying the bills. Look again at album purchases of the 45+ segment. What music are they buying and how much Country Music might they buy, if it were programmed to their tastes?

Traditional Tastes Will Sell Records to a Growing Market

Not only is the older segment more numerous and faster growing, they have been the traditional country audience for decades. They don't buy much hip-hop and heavy metal. They may not even know who Destiny's Child is! They sure know George Jones.

Country Music artist and airplay decisions ignore Boomer tastes. How else could Industry executives profess bewilderment that "O Brother" went platinum? Ignoring the vital demographic segment has been a key determinant of declining Country Music sales. Governor Sundquist was insightful at the opening of the Country Music Museum in asking for more airplay for country legends. Club-goers in Nashville hear great music that the rest of the country will never hear on the radio. According to Business Week (and Billboard Charts), a small Nashville clique produces 80% of Nashville Music. The Top 10 Country album accounted for 30% of all sales in 2000, according to SoundScan, compared to Top 10 share representing 20% of the market in 1995. The increasing concentration reveals the labels' emphasis on established artists and difficulty of new artists breaking in. Sales data suggest that Label-dictates have not matched the demands of the market. I still wonder how much music the 45+ segment might have bought if a broader set of artists were recorded and played.

Boomers grew up on classic Rock 'n Roll and traditional Country Music, neither of which is heard widely these days in its original format. These two music cultures are ripe to tap into to sell more Country Music. With rock stations playing rap/hiphop groups, Country Radio could cross-back to its Rockabilly root as one way to reach out to the Baby Boomers. The success of the "O Brother" bluegrass soundtrack suggests another root to tap.