Chronicle WWW.RENDERSI.COM La Vida Vinyl VOLUME 2, FEBRUARY 2018
The progression of the rebirth of vinyl has been going on for over a decade. It is far too long and too smooth of a growth cycle to call it a fad. BO LEMASTUS CEO, Crosley Brands Second in a four-part series exploring the Renaissance of Analog I GREW UP SOLELY IN AN ANALOG WORLD. EVERYTHING AND EVERYONE I INTERACTED WITH I DID SO IN THE PHYSICAL SENSE. I wrote and mailed letters. I took pictures of my friends doing silly bicycle tricks and developed and printed them in a windowless storage room that also served as my darkroom. I read physical books and my dad filmed my football games with a Super 8 motion camera. Now, all too close to the age of 60, I plug-in more than a half dozen devices each night. Because I am always pressed for time, most of my photography work is regrettably shot with a digital camera. I forget about the dozens and dozens of physical cookbooks my wife and I collected nearly three decades ago and, instead, find myself searching for the perfect marinade recipe on the Food Network app. Suffice it to say that the digital world I now live in doesn t resemble the analog-world in which I grew up. And, frankly, I go back and forth when my daughters ask me which experience was better. There is no easy answer because some aspects of life have been greatly enhanced by digitization like paying the utility bill or seeing my daughter on FaceTime from her college dorm room. While other aspects of life are arguably better in analog, like listening to a Rolling Stones vinyl record through a tubed amplifier and horned speaker system. In fact, the debate amongst consumers and audiophiles regarding the playback quality of digital versus audio has been raging on for a decade. Scientific truth is that a CD (non-compressed) and a vinyl record being pulled from the same source are mathematically equal. When you compress a digital file (MP3), it definitely loses quality and gains convenience. However, the resurgence of vinyl has little to do with the science of sound reproduction and much more to do with the human response to the intangible world of digital music. For people who actually care about the experience and the ownerships of music (you truly do not own your itunes stream), turning to vinyl provides a luxurious and tactile experience that is far more fulfilling than a digital download. It is an intimate musical experience, rich in physical contact and deep in devotion. When friends or family join in, music becomes social. It is miles and miles away from having my buds stuffed into my ears 1
whilst on a flight to NYC. So, in my opinion, vinyl is back because it re-delivers the immersive experience, the emotion and the connectivity to the artist that digital music stripped away. Vinyl Is Back According to Deloitte, vinyl records were projected to sell 40 million units in 2017, with sales of vinyl and vinyl-related products nearing the $1 billion benchmark for the first time this millennium. Rendersi believes this estimate was highly conservative and that it was exceeded by a healthy degree. This impressive revenue milestone has been untouched since the peak of the industry in the 1980s, although in those years albums were much less expensive and one billion units were sold at the peak. The current billion-dollar revenue mark is remarkable given that from 1991 through 2007, no single year produced greater than $65 million in newly pressed vinyl record sales. With $1 billion in revenue, vinyl still only represents six to seven percent of the broader music industry revenues (approximately $15 billion this year). However, according to Deloitte, 2017 marked eleven consecutive years of growth and seven years of double-digit growth for the vinyl record industry. The six to seven percent share compares to basically zero share in 2005 to 2007. 25- to 35-year old s accounted for 33 percent of all vinyl sales in 2015 compared to 18 percent for 45- to 54-year old s. According to MusicWatch, nearly 50 percent of all vinyl records purchasers are under 25 years old. In 2014, Urban Outfitters, the young adult lifestyle retailer, claimed to be the number one seller of vinyl records. In reality and according to Billboard, Urban Outfitters is actually the number two seller of vinyl with 8.1 percent market share behind (you guessed it) Amazon, who holds 12.3 percent of the share. There is no more recent market share data available but both Urban Outfitters and Amazon continue to be the top vinyl record retailers according to industry sources. Urban Outfitter s growth in vinyl sales seems to have caught on. Teen-centric retailer Hot Topic and Millennial-focused Target and Whole Foods have joined the vinyl bandwagon. Suffice it to say that the digital natives, those born after the era of LPs, are fully into vinyl and are the biggest drivers of its rebirth. FORBES REPORTED IN NOVEMBER 2017 THAT AN EBAY SURVEY FOUND 52 PERCENT OF CONSUMERS PREFER TO BUY MUSIC IN A PHYSICAL FORM SUCH AS CD AND VINYL RECORDS. Turntables Rendersi estimates that retail sales for turntables in the United States were approximately $165 million in 2016. Consumers mostly purchased faux-vintage turntables sold under the Crosley, Victrola and other nostalgic brand names. In step, the market for high-end turntables is also seeing renewed growth and even Panasonic has revived its Technics manufacturing line. Market research company, NPD Group, reports that premium products were a key contributor to sales growth, as dollar sales of turntables priced above $250 grew 135 percent in the 12 months ending February 2017. This growth accounted Vinyl records represent a blast from the past so one might consider nostalgic Baby Boomers the driving force behind vinyl record and turntable sales. But, data proves this is the wrong conclusion. According to The Economist, nearly 50 percent of all vinyl customers are 35 years old and younger and 2
for 11 percent of total sales. Sales estimates for 2018 for all styles of turntables seem to be accelerating. Innovative Technology Electronics Corp. led overall sales in 2016 and 2017 with their retro-styled Victrola turntables. The company purchased the fabled Victrola name in 2015 but has been participating in the turntable business under other brand names since 2013. Three years ago, Innovative Technology Electronics reported overall turntable sales of $39 million. They had a market share of 24 percent in 2015. And, in 2016 the company had a 34 percent market share. Innovative was purchased by private-equity firm RAF industries in June 2016. Crosley still holds the most coveted retail position with a devoted display presence with Urban Outfitters, alongside Polaroid and Fuji instant photography displays. And, Crosley has moved upstream with its products by introducing a well-received and highly-rated series of premium turntables and audio accessories. While Innovative leads with unit volume, Crosley leads in price per unit, first-tier retail affiliation and brand cache. Crosley also is known for its ultra-expensive vinyl record jukebox coveted as a must-have item for the man caves of numerous NBA, MLB and NASCAR athletes. Sales estimates for 2018 for all styles of turntables seem to be accelerating. Retailers One cannot address the rebirth of vinyl records without the advent of Record Store Day (RSD). Officially founded in 2007 by seven independent record store owners, RSD is now celebrated at more than 2,000 stores across the world on one Saturday every April. The day brings together fans, artists and independent and major music labels across the world, including the United States, United Kingdom and throughout Europe and Asia. Special and limited-edition records are pressed each year for RSD. In 2016, 60 different records were released solely and exclusively on RSD. Many executives in the vinyl record business have shared with Rendersi that the RSD is the single best thing that happened to the revival of vinyl and the importance of independent record stores. It is the single largest day of revenue and recognition for the vinyl record industry. While the sales for that day may only equal seven times a normal day, the attention and attachment that RSD brings to independent retailers is invaluable. According to DJ Magazines, in 2017, the United States leads the world with 1,482 brick and mortar record stores followed by the United Kingdom (537), Germany (453) and France (285). Nearly every one of these stores above now participates in RSD. According to Sound Scan, independent record stores accounted for 45 percent of all vinyl sales in 2015. Many of the stores discussed above are independently owned and have fewer Source: IBIS World 3
than five employees. However, their businesses are now thriving. The only major market share player is Trans World Entertainment that has rolled up more than five regional and local retailers that focus primarily on vinyl and music sales. Vinyl Records If turntables are the razors, then vinyl records themselves are the razor blades. And there is a very interesting and over-looked story here. In the United States alone, vinyl units went from just under one million units in 2007 to a remarkable 13 million units in 2016. This number will likely jump to over 14 million units in 2017. Someone had to make all those records and it was not (and is still not) the major music labels such as Warner, EMI, Sony and Universal. The music labels long ago shuttered their vinyl pressing plants. So, the supply of pressed vinyl comes from scores of independent pressing plants, often using antiquated equipment. As orders for physical records grew at 25 percent year-over-year, those that were interested in opening new pressing plants had to find the equipment they needed. As one industry veteran told Rendersi, finding pressing equipment was a huge problem because everyone who made the original designs are six feet underground. But, where there is consumer demand, there is always a way to fill it. It took millions of dollars and more than 10 years, but there are now three international companies Canada s Vinyl Tech, Germany s Newbilt and Sweden s Pheenix Alfa offering new record presses to plants worldwide. And, almost monthly, Rendersi learns of another pressing plant set to open. Today, there are more than 30 pressing companies in the United States to meet demand and many have multiple plants. Some of the more notable names are likely companies you have never heard of, but chances are, if you have recently purchased a new vinyl record, you have one of their products. Examples are Erika Records, United Record Pressings, Quality Record Pressings and musician Jack White s (yes, The White Stripes lead singer) Third Man Records. There are more than 70 international pressing companies in every region of the globe with Germany having the most next to the United States. By far, the largest global player in a highly-fragmented industry is the Czech Republic s GZ Media. What once was a state-run company, GZ Media and its new owner, Zdenick Pelk, now employ 2,000 people producing a reported 25 million records in 2016, up 40 percent from 2015. GZ has earned the respect of artists and has secured the exclusive rights to produce vinyl records for the back catalogues of such legendarybands as U2 and the Rolling Stones. You cannot be heralded as King of Vinyl by anyone better than Bono and Mick. Conclusion Rendersi believes vinyl is here to stay, just as physical books aren t going anywhere. Will vinyl continue to grow at 15 to 25 percent year after year for the next 10 to 25 years? Likely not. No doubt, the future of music is mostly digital, but vinyl will always be the sizzle in the industry (along with live concerts). Vinyl records and concerts offer us something its digital counterpart cannot: a tangible and immersive experience that can be extremely personal, engaging and emotional. As music industry veteran and Crosley executive Jeff Parish states, when you hand someone a vinyl record with a beautiful, art-filled cover and watch them handling the record itself, it becomes magical. The whole process and artistry that goes into a record truly connects the listener to the artist in a way that a digital download never will. Jim D Aquila Founder & CEO of Rendersi STAY TUNED FOR OUR NEXT CHAPTER: BOOKS Click Here for V1: Analog, Again 4
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