NOVEMBER 2007
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MUSIC WORLD FLAMES OUT - For the 648 employees of the 72-store Music World music chain in Canada, it will be a bleak Christmas. They face potential layoffs following the holiday retail sell-off period. Music World's parent company Pindoff Record Sales was bought on Nov. 12 by shareholders Kai Voigt, Stephen Granovsky and Lawrence Pollack. Two days later, it received creditors' court protection under Consumer and Corporate Affairs Canada. As president, Voigt has appointed Gary Stern as CFO, and Nick Phillips as COO.The retailer owed Pindoff Record Sales more than $30 million before the parent was acquired by the new owners, according to documents filed with Ontario Superior Court of Justice. The new owners now owe former owner Kroum T. Pindoff, a secured creditor, more than $20 million.In 2006, Music World lost $9.2-million on sales of $80.6-million, according to court filings. in 2005, it lost $3.2-million on sales of $96.1-million.The new owners basically financed their acquisition with a $12-million advance from the liquidators that they hired to sell the merchandise. As of Nov. 12, the liquidators are overseeing sell-off of inventory at the stores valued at about $21 million. The liquidators' objective is to recoup its $12 million plus make a profit on the inventory. That means in-store bargains as stock is liquidated and as suppliers worry about 8% of the Canadian music marketplace slipping away.Pindoff Record Sales continues to own a CD and DVD wholesaling division, as well as 60% of Montreal-based DEP Distribution Exclusive Quebec, a key distributor of French-language product in Quebec. The filing states that the most likely scenario for Music World is an orderly wind-down of business. The filing further states there is a "possibility" the new owners might try to operate a scaled-down Music World, Several suppliers, in fact, have been informed that under a reorganization, as many as 50 locations could continue to operate. However, many of Music World's mall leases, sources say, are due to expire within 2008-2009 with no automatic rights of lease renewal. That means these lease renewals will solely be the discretion of a handful of landlords who oversee malls. If they have to take back Music World's stores in their weaker malls, it is unlikely they will let Music World keep stores in their better malls. In order to operate a new Music World model, the new owners need to hold onto the better performing stores in the better malls. That will be a challenge.Kroum Pindoff and wife Eva founded Pindoff Record Sales in 1960, initially selling albums to convenience store owners from the backseat of their car. In 1962, the first Pindoff Record Sales warehouse opened and the company attained such rack accounts as The Hudson's Bay Company, and Sears. By 1970, Music World had been launched. At its peak in the mid-80s, the chain had 110 outlets. Canada media quite wrongly proclaimed that Music World's bankruptcy is the latest retail casualty of competition from music downloading, online file-swapping, and big-box stores. Those may be factors but Music World's previous owner should take much of the blame. If Music World had invested and evolved, if it had branched out into other entertainment product lines, and if it had not lost such key staff as executive VP Robert Smith, and GM/VP Terry Stevens in recent years, it would probably not be bankrupt today. In the end, the Pindoffs cash out with the sale to new owners; the new owners cash out by attaining the bulk of their purchase price funded by selling inventory to liquidator, and possibly being able to sidestep staff liability by filing for bankruptcy as well as reducing or dropping their retail business; and the Music World employees face getting screwed. In 1995, Pindoff Record Sales was named as one of Canada's 50 Best Managed Private Companies by The Financial Post.
CANADIAN MLA SIGNED -- Several years of negotiations between the Canadian Recording Industry Assn. (CRIA), and the Canadian Musical Reproduction Rights Agency (CMRRA), the music licensing agency that represents the vast majority of music publishers doing business in Canada, has resulted in the signing of a new six year Mechanical Licensing Agreement (MLA) on Nov. 8.The new MLA runs from 2007-2012. The rate for 2007-09 is $0.081 per track, where the running time of the recording is five minutes or less, plus $0.0162 for each additional minute or partial minute of running time. For 2010-2012, the rates are $0.083 and $0.0166, respectively. The rates under the last agreement, at its conclusion, were $0.077 and $0.0154, respectively.As well, CRIA and the CMMRA have agreed to work together in a transition to an all electronic environment. That effectively means the end of paper filings for mechanical licenses in Canada.
DOWNLOADING SPURS CD SALES? NOT BLOODY LIKELY -- A Statistics Canada report, released Oct. 31, indicates that the recording, and music publishing industries in Canada turned a healthy profit in 2005. The StatsCan study found that each of the three major segments of Canada's music industry (record production, music publishing, and recording studios) posted a profit in 2005. Total revenues reached $942 million with record production accounting for 80%. Yet, according to StatsCan, sales of recordings declined 3% to $575 million between 2003 and 2005. Gains were made, it indicated, by companies streamlining and restructuring global operations, and developing new distribution channels geared toward the digital market.Considering the continual job cuts at recording companies, the consolidation of manufacturing and distribution by all multinationals, and the ongoing loss of music sales, Canada's music industry is hardly as robust as the StatsCan figures indicate.Meanwhile, a report "The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music" commissioned by Industry Canada, and released Oct. 30th, concludes that file-sharing doesn't lead to reduced CD sales. In fact, it says, it may even lead to an increase in sales among those who download a lot. The study, by Birgitte Andersen and Marion Frenz of the Department of Management at the University of London in England, and Decima Research, surveyed over 2,000 Canadians on their music downloading and purchasing habits. The study claims that P2P file sharing does not put downward pressure on purchasing music, but tends to increase music purchasing. The Canadian Recording Industry Assn. (CRIA) has long argued that file sharing has been the main culprit of dwindling sales within the music industry.While it is a stretch to assume that file sharing is responsible for the entire decline in record sales since 1999, and that without file sharing there would have been an increase in sales, the Industry Canada study doesn't address why there is a decline in sales in a period in which file sharing has significantly grown What's wrong with music industry? Poor quality of music. No new major acts. Lack of development of new artists. Bad business deals. And, yes Virginia, downloading and P2P file-sharing. Ask your kid.
ADISQ SEEKS CANADIAN CONTENT REQUIREMENTS -- Canadian music industry players continue to worry about web-based music services, as well as telecommunications-based music services, being exempt from statutory domestic music quotas.In 1999, the Canadian Radio-television and Telecommunication Commission (CRTC) decided it would not regulate the Internet. However, the federal regulator is now studying the issue and plans to hold public hearings about the Internet at the end of 2008.In an interview with Montreal newspaper La Presse on Oct. 24, Michel Arpin, the CRTC's VP of broadcasting said "The door is not closed on regulating [the Internet]." He added, "In 1999, there was nothing to regulate."However, when CRTC Chair Konrad von Finckenstein delivered the keynote speech at the Canadian Assn. of Broadcasters (CAB) conference on Nov. 5, he indicated that the CRTC has no interest in regulating the Internet, but is instead interested in only broadcasting on the Internet.Arpin's comments came two days after Association québécoise de l'industrie du disque, du spectacle et de la vidéo (ADISQ), representing Quebec's recording industry, and 18 cultural unions and associations criticized the CRTC's handling of social and cultural matters. They called on Heritage Minister Josée Verner to put pressure on the CRTC to enforce the cultural and social objectives of the Canadian Broadcasting Act more rigorously. They also called on the federal regulator to be more involved in the Internet.Today, digital music services are offering multiple business models-including paid individual downloads, subscriptions and streaming radio-alongside mobile telephone music-related services from Bell Canada, Rogers Wireless and Telus.in most cases, these operators import content from U.S.-based services, and there is no shelf space guaranteed for Canadians.ADISQ, in particular, wants rules that bring CanCon requirements to the Internet. It would like the CRTC to require ISPs to prioritize Canadian content, noting that if ISP can prioritize content for commercial purposes then they can be required to do something similar to advance Canadian culture. In 1998, the performing rights organization Society of Composers, Authors and Music Publishers of Canada (SOCAN) made submissions to the CRTC for Internet and telecommunications-based services to be regulated like existing broadcasters. However, the CRTC declined to do so. in 1999, the CRTC announced a regulatory exemption for all new media. Several times since, SOCAN has asked for a ruling that mobile telephone services be treated like other broadcasters. But a review has yet to take place. There are those who contend that these new services present a significantly different environment from the existing broadcasting system. They suggest that the advent of such new media calls for changes in government policy as well as phasing out quota-based mechanisms. Source: THE LEBLANC NEWSLETTER, ISSUE#8 (Nov. 12 2007).
____________________________________
This blog is available and distributed for free by the offices of Mark Vinet and Wadem Publishing. Information contained herein should not be relied upon or considered as legal advice. This blog may be forwarded, downloaded or reproduced in whole in any print or electronic format for non-commercial purposes provided that its author is acknowledged and that you cc: mark@markvinet.com © ™ Mark Vinet & Wadem Publishing
Mark Vinet website
MUSIC WORLD FLAMES OUT - For the 648 employees of the 72-store Music World music chain in Canada, it will be a bleak Christmas. They face potential layoffs following the holiday retail sell-off period. Music World's parent company Pindoff Record Sales was bought on Nov. 12 by shareholders Kai Voigt, Stephen Granovsky and Lawrence Pollack. Two days later, it received creditors' court protection under Consumer and Corporate Affairs Canada. As president, Voigt has appointed Gary Stern as CFO, and Nick Phillips as COO.The retailer owed Pindoff Record Sales more than $30 million before the parent was acquired by the new owners, according to documents filed with Ontario Superior Court of Justice. The new owners now owe former owner Kroum T. Pindoff, a secured creditor, more than $20 million.In 2006, Music World lost $9.2-million on sales of $80.6-million, according to court filings. in 2005, it lost $3.2-million on sales of $96.1-million.The new owners basically financed their acquisition with a $12-million advance from the liquidators that they hired to sell the merchandise. As of Nov. 12, the liquidators are overseeing sell-off of inventory at the stores valued at about $21 million. The liquidators' objective is to recoup its $12 million plus make a profit on the inventory. That means in-store bargains as stock is liquidated and as suppliers worry about 8% of the Canadian music marketplace slipping away.Pindoff Record Sales continues to own a CD and DVD wholesaling division, as well as 60% of Montreal-based DEP Distribution Exclusive Quebec, a key distributor of French-language product in Quebec. The filing states that the most likely scenario for Music World is an orderly wind-down of business. The filing further states there is a "possibility" the new owners might try to operate a scaled-down Music World, Several suppliers, in fact, have been informed that under a reorganization, as many as 50 locations could continue to operate. However, many of Music World's mall leases, sources say, are due to expire within 2008-2009 with no automatic rights of lease renewal. That means these lease renewals will solely be the discretion of a handful of landlords who oversee malls. If they have to take back Music World's stores in their weaker malls, it is unlikely they will let Music World keep stores in their better malls. In order to operate a new Music World model, the new owners need to hold onto the better performing stores in the better malls. That will be a challenge.Kroum Pindoff and wife Eva founded Pindoff Record Sales in 1960, initially selling albums to convenience store owners from the backseat of their car. In 1962, the first Pindoff Record Sales warehouse opened and the company attained such rack accounts as The Hudson's Bay Company, and Sears. By 1970, Music World had been launched. At its peak in the mid-80s, the chain had 110 outlets. Canada media quite wrongly proclaimed that Music World's bankruptcy is the latest retail casualty of competition from music downloading, online file-swapping, and big-box stores. Those may be factors but Music World's previous owner should take much of the blame. If Music World had invested and evolved, if it had branched out into other entertainment product lines, and if it had not lost such key staff as executive VP Robert Smith, and GM/VP Terry Stevens in recent years, it would probably not be bankrupt today. In the end, the Pindoffs cash out with the sale to new owners; the new owners cash out by attaining the bulk of their purchase price funded by selling inventory to liquidator, and possibly being able to sidestep staff liability by filing for bankruptcy as well as reducing or dropping their retail business; and the Music World employees face getting screwed. In 1995, Pindoff Record Sales was named as one of Canada's 50 Best Managed Private Companies by The Financial Post.
CANADIAN MLA SIGNED -- Several years of negotiations between the Canadian Recording Industry Assn. (CRIA), and the Canadian Musical Reproduction Rights Agency (CMRRA), the music licensing agency that represents the vast majority of music publishers doing business in Canada, has resulted in the signing of a new six year Mechanical Licensing Agreement (MLA) on Nov. 8.The new MLA runs from 2007-2012. The rate for 2007-09 is $0.081 per track, where the running time of the recording is five minutes or less, plus $0.0162 for each additional minute or partial minute of running time. For 2010-2012, the rates are $0.083 and $0.0166, respectively. The rates under the last agreement, at its conclusion, were $0.077 and $0.0154, respectively.As well, CRIA and the CMMRA have agreed to work together in a transition to an all electronic environment. That effectively means the end of paper filings for mechanical licenses in Canada.
DOWNLOADING SPURS CD SALES? NOT BLOODY LIKELY -- A Statistics Canada report, released Oct. 31, indicates that the recording, and music publishing industries in Canada turned a healthy profit in 2005. The StatsCan study found that each of the three major segments of Canada's music industry (record production, music publishing, and recording studios) posted a profit in 2005. Total revenues reached $942 million with record production accounting for 80%. Yet, according to StatsCan, sales of recordings declined 3% to $575 million between 2003 and 2005. Gains were made, it indicated, by companies streamlining and restructuring global operations, and developing new distribution channels geared toward the digital market.Considering the continual job cuts at recording companies, the consolidation of manufacturing and distribution by all multinationals, and the ongoing loss of music sales, Canada's music industry is hardly as robust as the StatsCan figures indicate.Meanwhile, a report "The Impact of Music Downloads and P2P File-Sharing on the Purchase of Music" commissioned by Industry Canada, and released Oct. 30th, concludes that file-sharing doesn't lead to reduced CD sales. In fact, it says, it may even lead to an increase in sales among those who download a lot. The study, by Birgitte Andersen and Marion Frenz of the Department of Management at the University of London in England, and Decima Research, surveyed over 2,000 Canadians on their music downloading and purchasing habits. The study claims that P2P file sharing does not put downward pressure on purchasing music, but tends to increase music purchasing. The Canadian Recording Industry Assn. (CRIA) has long argued that file sharing has been the main culprit of dwindling sales within the music industry.While it is a stretch to assume that file sharing is responsible for the entire decline in record sales since 1999, and that without file sharing there would have been an increase in sales, the Industry Canada study doesn't address why there is a decline in sales in a period in which file sharing has significantly grown What's wrong with music industry? Poor quality of music. No new major acts. Lack of development of new artists. Bad business deals. And, yes Virginia, downloading and P2P file-sharing. Ask your kid.
ADISQ SEEKS CANADIAN CONTENT REQUIREMENTS -- Canadian music industry players continue to worry about web-based music services, as well as telecommunications-based music services, being exempt from statutory domestic music quotas.In 1999, the Canadian Radio-television and Telecommunication Commission (CRTC) decided it would not regulate the Internet. However, the federal regulator is now studying the issue and plans to hold public hearings about the Internet at the end of 2008.In an interview with Montreal newspaper La Presse on Oct. 24, Michel Arpin, the CRTC's VP of broadcasting said "The door is not closed on regulating [the Internet]." He added, "In 1999, there was nothing to regulate."However, when CRTC Chair Konrad von Finckenstein delivered the keynote speech at the Canadian Assn. of Broadcasters (CAB) conference on Nov. 5, he indicated that the CRTC has no interest in regulating the Internet, but is instead interested in only broadcasting on the Internet.Arpin's comments came two days after Association québécoise de l'industrie du disque, du spectacle et de la vidéo (ADISQ), representing Quebec's recording industry, and 18 cultural unions and associations criticized the CRTC's handling of social and cultural matters. They called on Heritage Minister Josée Verner to put pressure on the CRTC to enforce the cultural and social objectives of the Canadian Broadcasting Act more rigorously. They also called on the federal regulator to be more involved in the Internet.Today, digital music services are offering multiple business models-including paid individual downloads, subscriptions and streaming radio-alongside mobile telephone music-related services from Bell Canada, Rogers Wireless and Telus.in most cases, these operators import content from U.S.-based services, and there is no shelf space guaranteed for Canadians.ADISQ, in particular, wants rules that bring CanCon requirements to the Internet. It would like the CRTC to require ISPs to prioritize Canadian content, noting that if ISP can prioritize content for commercial purposes then they can be required to do something similar to advance Canadian culture. In 1998, the performing rights organization Society of Composers, Authors and Music Publishers of Canada (SOCAN) made submissions to the CRTC for Internet and telecommunications-based services to be regulated like existing broadcasters. However, the CRTC declined to do so. in 1999, the CRTC announced a regulatory exemption for all new media. Several times since, SOCAN has asked for a ruling that mobile telephone services be treated like other broadcasters. But a review has yet to take place. There are those who contend that these new services present a significantly different environment from the existing broadcasting system. They suggest that the advent of such new media calls for changes in government policy as well as phasing out quota-based mechanisms. Source: THE LEBLANC NEWSLETTER, ISSUE#8 (Nov. 12 2007).
____________________________________
This blog is available and distributed for free by the offices of Mark Vinet and Wadem Publishing. Information contained herein should not be relied upon or considered as legal advice. This blog may be forwarded, downloaded or reproduced in whole in any print or electronic format for non-commercial purposes provided that its author is acknowledged and that you cc: mark@markvinet.com © ™ Mark Vinet & Wadem Publishing
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