Digital Players Dim Recording Industry Bright Spot

By Charles Duhigg

Nov. 25, 2005 12 AM PT

Times Staff Writer

Since debuting seven years ago, “Now That’s What I Call Music!” has earned the right to be called something else: an industry franchise.

The music compilation series, now in its 20th volume, has shipped about 142 million CDs domestically, exceeding the U.S. shipments for Michael Jackson, Guns N’ Roses and Britney Spears put together.

But industry executives believe that the proliferation of digital music players such as iPods could eventually spell trouble for one of the brightest spots in a business that has been decimated by online piracy. The reason: They make it easy for music fans to assemble their own playlists.

“Except for ‘Now,’ the compilation market has significantly softened,” said Bob Mercer, senior vice president at Universal Music Enterprises. “Why buy a compilation album when you can create your own?”

Shipments this year remain strong but nonetheless are unlikely to come close to the 11 million shipped copies of four “Now” albums released last year.

Pushing to keep “Now” at the top of the charts are three of the industry’s largest companies -- Sony BMG, Universal Music and EMI Music -- that sell the CDs in a joint venture. They hope to counter any threat to their cash machine by continuing to adapt to changing musical tastes.

On average, the partners release one new volume every four months, taking turns shipping the albums and reaping the lucrative distribution fees.

A secret committee of about six executives, evenly divided among the three companies, chooses the songs. This month, the most recent “Now” featured such diverse artists as Coldplay, Kelly Clarkson, Ludacris, the Pussycat Dolls and Keith Urban. It debuted at No. 1 and has sold 768,000 copies to date, according to music sales tracking firm Nielsen SoundScan

Companies say competition to be included on the albums is fierce. Committee members gather every few months to analyze sales data and radio charts and begin horse trading. Members are subjected to lobbying from within their own companies as well as by outsiders.

Representatives of the Sony BMG group Franz Ferdinand, for example, successfully pushed to include the single “Do You Want To” on the most recent compilation, even though it was on the band’s album released around the same time.

Executives say “Now” albums strike a chord with consumers because they reflect the year’s most popular music, not just songs that companies want to promote.

“ ‘Now’ has succeeded because it’s become a strong brand on its own,” said Bruce Resnikoff, president of Universal Music Enterprises. “And we’re protective of that brand. When tastes changed from pop to rap, so did the songs on ‘Now.’ ”

Songs from groups on other labels also occasionally make the cut. “Listen to Your Heart” by DHT (featuring Edmee) from independent label Robbins Entertainment appears on the most recent “Now.”

Still, the collections tilt toward the partners. On the latest CD, 17 of the album’s 20 cuts came from the three companies. Eight of those tunes -- the largest from any one firm -- were released by Universal, which distributed the CD and has released seven of the year’s 10 bestselling albums.

“We don’t specifically say that each label gets a certain percentage of songs,” Resnikoff said. “But there is a lot of negotiation, and there is a lot of pressure to choose some songs by groups we’d like to spur interest in.”

The idea for “Now” is an import from Britain, where the version there is up to Vol. 62. Executives at London-based EMI first suggested U.S. record labels do the same. But the labels resisted, hoping instead that consumers would spend more money assembling the songs they wanted by purchasing multiple CDs.

EMI, Universal Music and PolyGram -- later bought by Universal -- agreed to participate on the condition that the companies commit a combined $1.5 million for prime-time television advertising. Still, executives were surprised when the first album debuted in 1998 on the Billboard Top 40 chart, selling more than 1 million copies.

“It’s a sampler that helps people figure out what they want to buy,” said EMI advisor Roger Ames, who helped launch the series when he was president of PolyGram Music Group. “And it’s an easy way for listeners to appear hip.”

Buoyed by the advertising, bands that had agreed to appear on the first album -- including the relatively unknown groups Marcy Playground and Denmark’s Aqua -- saw an immediate surge in sales. A second “Now” compilation sold more than 2 million albums, as did the third volume.

Within a year, the labels that had refused to participate -- Warner Music Group, BMG (which later merged with Sony) and Arista -- launched their own competing compilation called “Totally Hits,” which never came close to matching the success of “Now.”

Nearly all of the subsequent “Now” albums have been top sellers, with a special “Now That’s What I Call Christmas!” holiday CD shipping more than 6 million copies since its 2001 release. To expand the franchise, the record labels in March will release an album tentatively titled “Now That’s What I Call Latin Music!”

Despite the success, some executives worry that the “Now” compilations may be reaping short-term profits at the long-term expense of the business. Just as digital downloads are allowing consumers to buy singles, instead of whole albums that expose them to an artist’s larger repertoire, executives believe that “Now”-like compilations are doing the same.

“We’ve trained a whole generation of kids to consume popular singles, rather than whole albums,” said artist manager Ray Cooper, former co-president of Virgin Records’ U.S. operation. “Now they cherry-pick songs they want off the Internet, and ignore everything else.”

(BEGIN TEXT OF INFOBOX)

Spinning numbers

Albums in the “Now That’s What I Call Music!” series that have logged more than 3 million copies shipped

“Now 5”

Copies shipped (in millions): 4

Date released: 11/2000

Sample songs: “Show Me the Meaning of Being Lonely”; “Lucky”

Artist: Backstreet Boys;Britney Spears

“Now 6”*

Copies shipped (in millions): 3

Date released: 4/2001

Sample songs: “Bye Bye Bye”; “It Wasn’t Me”