Legal Download Users Triple, Still Buy CDs

Reznor Nails Ex-Manager in Lawsuit

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Reprinted with permission from Hits Magazine

May 17, 2004

Maybe this music business thing has a future after all.

According to research by The NPD Group, legal digital music usage more than tripled among CD-buying consumers in 2004, with an increasing number of CD buyers also purchasing from legal digital music download services, such as iTunes and, among others.

Findings show that legal digital music services also appear to attract consumers who purchase more CDs than the average consumer, and fewer of them are using illegal P2P services.

Hey, that's what they say.

Just under 5% of CD buyers reported using a legal service to purchase music during the first quarter of 2004, nearly three times the 1.7% level NPD reported for the same period in 2003.

Among music buyers who purchased both physical CDs and a song download from a legal service, the likelihood that they also downloaded a song illegally fell from 64% last year to 42% in 2004.

Also, consumers who downloaded from a legal service or became paid members of subscription services showed only a slight reduction in the number of CDs that they purchased at retail. The average consumer who paid for digital music as well as CDs purchased less than one fewer CD in 2003 compared to 2002.

NPD Music President Russ Crupnick said: "Paid services like iTunes and Rhapsody appear to be attracting core music buyers, which can create a firm foundation for legal digital music purchases. To date, NPD data shows that there has been a small reduction in sales of CDs; however, that decline might be offset by the overall value of the digital customer and the downturn in illegal file sharing."

Now that's music to the record industry's ears.

CD buyers who also used an online music subscription service, such as Rhapsody, in the past 12 months purchased an average of 11 CDs last year; those who had paid for a music download from legal download site, like iTunes, purchased 10 CDs; those who used a P2P file-sharing site purchased eight CDs; and those who did not download or stream music from the Web bought six CDs.

"Our research shows that it's the people who are really into music that are beginning to adopt paid digital services as an additional way of acquiring and enjoying music, and so far these services are living side by side with traditional CDs," added Crupnick. "As the industry matures and digital music becomes even more mainstream, it remains to be seen just how much paid digital music will affect the market for CDs. And if you believe that, I have a bridge in Brooklyn to sell you."

Data for the study was derived from the NPD MusicWatch, which provides weekly tracking of music purchases from a panel of consumers, including demographics, shopping habits, retailers, purchase motivators and pricing, based on more than 100,000 transactions annually. The NPD MusicWatch Peer-to-Peer Study, a survey covering use of digital music services that was conducted in February 2004 among a sample of 5000 individuals, was also used in the research.

HITS magazine is the most powerful information vehicle in the music industry, and is read religiously by all the top executives and everyone else.

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Reprinted with permission from Hits Magazine

May 19, 2004

This could get uglier than a Nine Inch Nail video.

Trent Reznor has sued his ex-manager (and longtime friend) John Malm, along with business manager/accountant Richard Szekelyi, charging their Ohio-based J. Artist Management (JAM) company with "fraud and breaches of fiduciary duties," and swindling millions of dollars.

Reznor, who had Malm as his manager since the mid-'80s, fired him about a year ago, and is now repped by Jim Guerinot's Rebel Waltz.

The lawsuit was filed in U.S.District Court Southern District of New York.

The suit seeks to "undo years of abuse of fiduciary duty... owed to Reznor; undo the numerous unconscionable contractual arrangements and unwind the numerous companies [they] created; confirms rightful ownership of intellectual property and compensate Reznor for the millions of dollars wrongfully taken from him."

Reznor has petitioned the court to open up the books to determine how much is actually owed to him. His allegations against JAM include:

*Inducing Reznor to sign a five-year 1989 Management Agreement while failing to disclose and omitting material information.

*Registering the Nine Inch Nails copyright and taking 50% ownership in merchandising and the Nothing Records label, among other Reznor projects.

*Diverting more than $3 million of Reznor's money to jointly owned corporations without his knowledge.

*Using Reznor's and company money for personal travel, entertainment and expenses.

*A management agreement that gave them 20% of all gross monies paid to or earned by Reznor in perpetuity, even if the company is no longer managing him.

*Being entitled to 20% of all album advances, including those that have not been recorded, and giving itself the "irrevocable" right to collect income payable to Reznor, endorse his name, cash all checks payable to him, and pay itself using such monies.

Reznor is asking to retain full interest in the Nine Inch Nail name, logo and any other intellectual property, a restitution of owed money and an award of consequential and punitive damages.

HITS magazine is the most powerful information vehicle in the music industry, and is read religiously by all the top executives and everyone else.

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By Kenny Kerner

William Hung, the American Idol contestant referred to as "possibly the worst singer in the world" by AI judge Simon Cowell, is laughing all the way to the bank! Hung's debut CD Inspiration, on the Koch label, debuted at Number One on Billboard's Independent CD charts and at #34 on their Top 200 album chart. She Bangs, indeed!

Will former Poison frontman Bret Michaels be the next rocker to follow in the footsteps of Kid Rock, Sheryl Crow and Uncle Cracker and cross over into the country market? And while we're in the country, check out new releases from the Mavericks and Big & Rich. These two CDs are really special... The over 35 demographic is getting a huge push from the industry as artists like Bette Midler, Rod Stewart, Michael McDonald, Hall & Oates and others are targeting them for future CD and concert sales.

Pink will reportedly get the starring role as Janis Joplin in the feature film, The Gospel According to Janis, being directed and co-written by Penelope Spheeris. Paramount Pictures is also planning a biopic called Piece of My Heart starring Renee Zellweger...

New Hanson CD on their own indie label is getting some surprisingly good reviews—especially concerning their vocals...

Elton John getting ready to tour with the Philharmonic Orchestra this summer. Do not miss this one...

And speaking of orchestras, if the show ever comes to your town, run out to see Bugs Bunny on Broadway. It's a live concert that shows vintage Bugs cartoons on a giant screen,but the music is performed live by the orchestra. Truly mind blowing. You can thank me later.

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