Canadian Music Industry Readies Relaunch Of Singles Format

Canada's music industry is gearing up for the return of the singles configuration.

Industry sources say the relaunch should take place by July, with all major labels participating. The intention is to firmly re-establish the configuration in the Canadian marketplace by September and then gauge consumer response during the fourth quarter. EMI Music Canada president Deane Cameron says, "This could very well be the opportunity for us to develop a new buyer."

Canada's music industry lost confidence in singles in the early '90s. In 1994, a few companies—including PolyGram and Sony—tried to make an earnest investment in them. But without support from other labels, singles disappeared as a major item at Canadian retail.

Simultaneously, with a lack of retail availability of most radio hits, there has been an enormous demand for compilation albums targeted at 12- to 25-year-old consumers, including such domestically produced, high-profile series as "MUCHDance," "Big Shiny Tunes," and "Now That's What I Call Music!"

No Configuration Consensus

While there is increasing acknowledgment between key retailers and label executives of the need for a singles market in Canada, there is as yet no consensus on what constitutes the configuration. Packaging, pricing, and how many tracks to make available are now under review by labels body the Canadian Recording Industry Assn. and the Retail Music Assn. of Canada (RMAC).

"Discussions are in the early stages," Sony Music Canada president Denise Donlon notes. "But there's real motivation from retailers and labels to see the relaunch through. We are looking at other markets, particularly Europe and the U.K., to find out what works."

According to the last sales estimates available from the International Federation of the Phonographic Industry, the retail singles market in Europe fell from 217 million units in 1999 to 199.7 million units in 2000. More recent figures from the British Phonographic Industry showed three consecutive years of decline in the U.K., from 80 million units shipped in 1999 to 59.5 million units in 2001.

Many Canadian music retailers have long contended that readily available singles could provide an entry level for kids growing up and buying music. Labels here have resisted for several reasons, including the related costs in bringing CD singles to market, a belief that singles hurt album sales, and low sales for currently available CD singles of between 2,000 and 6,000 units.

"Kids are in our stores, and there's nothing to buy for $5 Canadian [$3.14]," says Andrew Pollock, VP of marketing for HMV North America, which operates 98 stores in Canada. "We've let labels know we see a single as two tracks—one not on the album—in a slimline jewel case with whatever artwork is economically viable and priced at under $5 Canadian."

Universal Music Canada president/CEO Randy Lennox agrees: "A CD single priced at around $2.99 Canadian-$3.99 Canadian [$1.88-$2.51] is a palatable value proposition. Singles can cannibalize album sales, but the risk of relaunching is worth taking, because of the need of an entry point in the market for young buyers."

Noting the low profit margin of CD singles, Warner Music Canada senior VP/managing director Steve Kane adds, "Nobody should be fooling themselves that we're going to make money. However, we will be giving people an entry point they don't have right now."

But given the widespread practice of downloading and CD burning in Canada, some industry figures are skeptical about the relaunch. Terry McBride of Vancouver-based Nettwerk Management asks, "Why would anyone spend $3 Canadian [$1.89] for a CD single when they can download it?"

Sony Music Canada senior VP of sales Don Oates counters, "Downloading is cannibalizing album sales; why not put singles back into the marketplace and have some control?"

Less than 5% of hit radio songs are currently domestically available as commercial singles in Canada; they generally sell at retail for $3.99 Canadian-$5.99 Canadian ($2.51-$3.77). Supply is limited primarily to superstar acts. Retailers also buy CD-single imports, which retail at between $5.99 Canadian and $7.99 Canadian ($3.77-$5.02).

"We pick up whatever CD singles are available. But for the top 20, only two or three are available," notes Bruce Mackenzie, senior buyer at Pindoff Record Sales, which operates the 102-store Music World chain nationally.

RMAC president Ken Kozey, who is also purchasing manager at Handleman Co. of Canada, cautions: "We need a year to get full retail and label support so that consumers know singles are available en masse."

As well as the issue of establishing pricing, there are several other significant obstacles to overcome first, including gauging the availability of tracks and/or additional mixes. With singles not readily available in the U.S., Canadian labels may also have to originate artwork of their CD singles—adding to bottom-line costs.

New return policies will also have to be considered. "We're going to ask for a 100% return rate," says Tim Baker, buyer for Sunrise Records, which has 32 stores in Ontario. But several retailers privately concede that a 100% return privilege will be firmly resisted by most labels.

"What's more likely is a 50% return privilege or having CD singles as part of our overall return percentage," one says. "With a 100% return privilege, retailers wouldn't watch what they bought."