What Does the Economic Future Hold for the Music Industry?

What Does the Economic Future Hold for the Music Industry?

Since becoming president and CEO of NAMM (National Association of Music Merchants) in 2001, Joe Lamond has watched the music industry take a Dickensian turn: from the best of times to the worst of times.

A downward-spiraling market took its toll on the summer trade show, held in Nashville on July 17-19, with only 383 companies exhibiting and 12,967 total registrants. To accommodate — and court — attendants, NAMM made some significant modifications: adjusting booth prices, introducing the “Club” option for manufacturers who wished to meet with dealers without renting booth space, and ultimately announcing last-minute reductions in some hotel rates.

Riding out the wave of financial uncertainty is nothing new for Joe Lamond, an industry veteran whose retail background was built during previous recessions and consumer trends that affected manufacturers and dealers alike. Thus, he was able to offer hope in his keynote address in Nashville and remains optimistic that the industry will not only survive but also thrive in the coming year, as part of what he sees as an inevitable cyclical economic pattern.

Overseeing NAMM’s day-to-day activities, its global outreach, various music advocacy programs and market development comes with a host of responsibilities that keep Lamond on the road at least half of the year, meeting with NAMM members, expanding the organization’s public profile and nonprofit work, and of course organizing the two annual trade shows. He also remains surprisingly accessible to NAMM members, show attendees and media, which is why Ink 19 was able to approach him about a post-summer show interview to discuss the state of the industry, the future of music-making, and what dealers and manufacturers can look forward to in the coming year.

Now that the summer show is behind us, what is your retrospective overview?

The summer show is a smaller networking event for our industry. The winter show brings in 85,000 – 90,000 people; it’s the world’s show. All the new products are debuted and people set their plans for the year. The summer show has always drawn 20,000 or less. We have a lot of NAMM University courses, a lot of networking, people place orders and get their plans together for the fall and holiday season. Plus, people love to be in Nashville. It’s fun for the artists and attendees, and it’s a quick trip for most of them and a chance to break away.

When we came back to Nashville last year [NAMM temporarily held its summer show in Austin, Indianapolis and Austin] we saw a 57 percent increase and this year we had a drop, also a 26 percent drop over last year’s numbers, coming off of a good year. This is not the year that our members are going to spend money, so we reduced booth space to make it more affordable. Our dealers were impacted directly this year with retail consumers cutting back; all categories of sales are down, not just in our industry. We encouraged our members to hang tight, to come to the show if they could. Our main interest is that our 9000 member companies around the world stay healthy and competitive and be able to serve your readers. This is a reflection of tough times. Big exhibitors sat it out, and the flip side is that a third of our exhibitors were brand new and rocketed into the industry quickly out of the shadow of the iconic names. As one exhibitor told me, “It was their loss and our gain.”

NAMM’s perspective is simple. Our members come to the Nashville show and it’s our job to provide that venue for them. We feel an obligation: as long as enough members make it viable to produce the show, we should do so. It’s very important for the independent dealers. All of our members are part of our success, and I hope we can get them back next year. With most things there is a yin and a yang, and this show was the perfect example. It was smaller, but those who were there benefited from it.

What was your initial reaction when you first received word that some of the major companies — Fender, Gibson and others — were pulling out?

NAMM is 109 years old and you’ve got to take the long view here. I can read about NAMM during the Great Depression. We are now in one of our worst economic cycles, so whatever is best to keep these companies viable and healthy, I support that 100 percent. Who am I to say, “No! Come anyway!” My response was, “Do what you need to do, and we’ll see you next year.”

Did you consider canceling the show?

Always. Every year! It’s almost like Sesame Street says: they’re in their 40th experimental season! But we’ve got to listen to our members and react to their needs. If they say, “The winter show is enough,” we’ll do that and make sure all the people who benefit from the summer show will benefit from the winter show. After 109 years, we’re in the fortunate position to be able to do what the members want. The summer show is a member service consideration.

What is the importance of these shows, of bringing manufacturers and dealers together in one venue?

It is critical to the industry in many ways, and it fulfills a very human need. Periodically, we hear the call for the demise of trade shows, whether because the new technology, the internet, allows people to hold meetings online, or early on, UPS or the postal system could take care of communication. Our friends in Frankfurt say that there have been many calls, over and over, for the demise of the trade shows going back to the Frankfurt Book Fair, which is one of the longest-running and largest trade shows. Frankfurt has been doing trade shows since the 15th century, but for over five centuries they fulfill a human need.

What does that mean to NAMM? The winter show unifies the global industry under one roof for four days. You get the smartest people in the business and the diversity; they’re having meetings, communicating. Thomas Edison was a NAMM member. MIDI was born in the early 1980s from a meeting at a NAMM show. People come together and have conversations and there’s influence and spark. They see friends, catch up with peers and coworkers, share news of the industry. There is something inherently human about bringing everyone together in Anaheim for four days of unifying that literally is impossible to measure in sales or productivity, but it has changed the trajectory of the entire industry for the better. Every industry has these gatherings, whether it’s airline pilots, educators — every industry. I go back to the fulfillment of a fundamental human need. And they’re a lot of fun! These people work 14-hour days, sometimes seven days a week, and they need a break. This may be their only break from business in the entire year. When they return home they’re recharged, they have fresh ideas, and it translates to customers who see the new products and the excitement surrounding them.

Let’s look at two trends. One is major companies buying up smaller companies. The other is the pairing of hardware and software companies. What is your take on both?

The consolidation and breakup of companies is a cycle. The top 200 companies in our industry see a roller coaster that repeats in certain economic conditions. Companies merge, economic conditions change, the companies break apart and are sold off, they are taken over by entrepreneurs and the cycle repeats. When they break apart, it gets interesting. Fender and Gibson were unwanted in the 1980s and were both sold off for a fraction of their worth. They were taken over and began to thrive and grow again. The cycle is inevitable, and when the breakups happen you get fresh blood, innovation and creativity, and the industry makes leaps forward.

The ways to make music are blurring together. Music’s role today is everywhere and nowhere. It’s a part of our lives in every setting. It’s made with traditional instruments and remixed by every kid with Garageband and a Facebook page. Whether what it means to be musical is broken down by Guitar Hero or Rock Band is debatable, but to some people it’s inspirational. It’s said that there are two types of people in the world: those who make music and those who wish they could. Everything has changed in the ways we make and share music. It’s an exciting time.

When do you expect an economic turnaround?

Again, it goes in cycles. We always say that there are no guarantees in life, but here’s one: This will end, and we’ll ricochet to a new era of prosperity and then overshoot into another recession. I hope that by the fall and holiday season, as we get ready for the January 2010 show, that we’ll see a return to more historical sales levels. This thing is two years old, and since the last 100 years, these [downturns] last 12 months, 20 months if you count the Great Depression. We’re 19 months in, and if we go to the fall we will have exceeded the Great Depression.

Do you expect, or fear, that we will see more stores and companies go down before this is over?

That’s a really good question. In the early 1980s a lot of mall stores were popular, and NAMM lost over 1200 member stores in 18 months. It was a catastrophic change for us, followed by one of the biggest growth periods we ever experienced. I don’t know how this will play out. Any drop-off has been replaced by new members, so we’re even, but where it might go – we hope our members are smart and very good business people who have learned a lot so that they can weather this out and be ready and poised when prosperity returns.

Will the Guitar Centers, Musicians Friends, and Best Buys continue to threaten the survival of independent retailers?

I talk about our members as a whole, and I don’t think I can say that one is better or will do better than another. They are all members of NAMM, and we fight for all of them so that more people will play music, and so that they will do the right thing and take care of their customers. How business goes from there is in their hands. I hope they all do well.

Coming from a retail and marketing background, having seen previous downturns, what strategies should independent retailers and smaller manufacturers have in place in order to survive?

The real fundamentals are very important during a downturn and forgotten in good times. Number one: Have your financial house in order. Number two: Teach or have awareness of starting new players. Every retailer should have teachers in their store and all manufacturers should support music education. Number three: Take care of your customers. I spent 16 years in retail, and from 1989 until 1998 I worked at Skip’s Music in Sacramento. I worked through a recession, but I didn’t think about recessions while I was at work; I focused on every customer that came through the door, on taking care of them and how to serve them.

What will the music industry look like once we emerge from this crisis?

I think shopping habits will change. My personal opinion and hope is that we’ll come out of this sickening period of gross commercialism and materialism that wasn’t sustainable — of people spending money they don’t have. People will be concerned with things that have intrinsic value, like family and friends, and music is perfect for that because it fits into everyone’s life, from preschoolers to seniors. Music’s time is about to come, and post this recession will be a perfect time for making music.

Where does this leave musicians?

That’s where I get into the democratization of everything. There are more options for working musicians and songwriters to have great equipment and distribution of songs. The way people play live has changed. I met a band from Austin who have no promoter and no record label. They organize their tours through Facebook and Myspace. Their friends and fans find the venues, sell the tickets, let the band stay in their homes when they’re in town, give them a meal, the band plays the show, sells CDs and product, and then the next day it’s on to the next town to do the same thing the same way. Fans have had a more engaging relationship with the band and the show. They have a personal stake in it. How do we define mass success today? Bands control their own destinies.

What will the internet do to the independent retailers? Will buying online replace the personal experience and make those stores obsolete?

When we come out of this, people will research products online, but ultimately I think they will want relationships with retailers, and our members are craving that experience. I made predictions last year that we would see the revitalization of all business in America, of the local community business that makes a local store a “local” store, with people who are active in the community. That was in the summer of 2008, and I believe it even more now — that we will see the survival of independent business in America.

The winter show is only six months away, and obviously you are already in the planning stages. What are your predictions for Anaheim?

We will see a business that will be improving by then. The industry will be ready for a nice gathering, eager to see each other and say, “Whew, we lived through that one!” There will be increased camaraderie after a two-year period. We will see a huge show, technically, a lot of music, a blending of great business and also the fringe that goes along with NAMM — artists, celebrities, energizing events, concerts and a good mix of business and pleasure. I expect a lot of business and important meetings. This industry is ready to come together and chart a course post-recession.

NAMM: www.namm.org

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