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Have we reached 'peak vinyl'?



LAST YEAR SAW MORE RECORDS SOLD THAN IN 35 YEARS, BUT HOW IS THE MARKET LOOKING NOW?
Predictions for 2023’s Physical Music Market

 

“This may sound controversial, but we may have reached ‘peak vinyl’, which means new trends will play out in 2023. We’re hearing from some experts that records won’t be released in so many format variants this year - so fewer colours of vinyl, and maybe no Super-deluxe option.
Who knows, we may even return to liking the sound of the CD!”
Karen Emanuel, Founder and CEO, Key Production Group

Karen Emanuel is the CEO of Key Production - a multi award-winning business leader with 33 years’ experience in the manufacture of physical music - vinyl records, CDs, DVDs, plus bespoke packaging. She believes the music landscape is going to see significant changes in 2023 in regard to the consumption and product balance within physical music formats. Will CD sales rise in relation to vinyl records? How will the cost of living crisis affect the marketplace, thanks to lower disposable incomes amongst consumers, and higher energy costs for manufacturers and distributors? Are there more nuanced changes affecting both demand and supply? Listen up….


BACK TO BLACK: VINYL COMES FULL REVOLUTION
Ever since consumers have been able to get their hands physically on the music they love, rather than relying on ‘the wireless’, new music formats have waxed and waned in terms of their popularity, as portrayed in this fascinating animation, albeit one based on US revenue: We may have seen cassettes return to stores for a whole new audience, but do you remember the 8-track format of the mid 1960s to early 80s? Or the minidisc?

Fast forward to December 2022 when it was widely reported that vinyl record sales had eclipsed those of CDs for the first time in 30+ years, with sales figures rising over 15 years to reach £116.8m in 2021 according to the BPI. (In 2021, records made up 23% of all albums purchased.) In 2022, major acts such as Harry Styles, whose album, Harry’s House, sold over 182,000 copies on vinyl in the first week of release, helped fuel this revolution. As did smaller artists signed to independent labels, such as Don Broco on SharpTone Records, and Working Men’s Club on Heavenly Recordings. These latter albums were pressed via Key Production, the UK’s largest operator in this market, a 65 person strong company based in North London for over 30 years, specialising in physical music production and specialist packaging. Key’s recent products include an intricately designed CD and vinyl box set for the band, Muse: Muse: Origin Of Muse, featuring remastered albums, B-sides, unreleased demos and live performances from the band’s early career, making fans feel even closer to their beloved band than a streaming platform ever could.

Last year, the world’s biggest artists and bands, including Adele and Coldplay, had to queue up to have their record released on vinyl, which took 9 - 12 months to happen because of global shortages in capacity and raw materials, including PVC. Karen Emanuel, Founder and CEO of Key Production, notes, “It’s been tough lately as we’ve had to adapt to enormous demand with limited options in terms of capacity. Fortunately, right now, we’re able to tell labels we can press their records in around 3 months. Covid notwithstanding, there have been so many factors against us as there are many ‘cogs’ in the machine we help turn. Plus, we’ve been pushing for greener products as part of our long term sustainability drive, which requires adaptation.”


LEARNING TO SLOW DOWN
The return to vinyl manufacture on a larger scale was achieved despite the seismic challenges of keeping up with demand from multiple generations: in particular Millennials and Gen Z, who stream their music, but also want to ‘touch and feel it’ for a closer connection to the artist/s. The music industry and consumer is still feeling the legacy effects from the shutdown of many factories, pressing plants and related operations in the 1990s, when music ‘went digital’. The challenges involved in generating new capacity have been complex. “On the one hand, business is booming for Key, and finally we’ve got increased capacity which is reducing wait times. But the challenges have been pretty epic. Even with new machines coming online, there’s been the challenge of finding staff to operate them and to work on the packaging side of operations. Plus, ongoing supply chain issues. It has been a battle. We’ve even had to open an office in the EU to try to deal with Brexit and VAT challenges. Fortunately, our teams have been brilliant, and our clients patient, but in 2023, I think the challenges will be different. As always it’s about staying one step ahead and adapting fast,” explains Karen Emanuel.

Record labels got used to having to adapt their release schedules, such was the insistence of fans to own their music on vinyl, with its rich sound, large format sleeves, and all-round ability to provide ‘physical connection’ to the artist - over and above that afforded by streaming their music. Some within the industry complained that smaller or independent labels suffered disproportionately versus the major labels, but Karen has her own views on this debate: “Key Production has its grassroots in smaller labels, groups and artists, and we have never forgotten our roots. There have been rumours and reports that the major labels are given preferential treatment - allowed to jump the queue to get their releases pressed faster. This is not our experience, and it would never be our style. Everyone is equal amongst our clients at Key Production. We just have to be extremely organised on the planning, logistics, and other fronts.”


RED, GOLD AND GREEN. (AND SUPER DELUXE)
But will demand patterns shift in 2023? According to record label heads and other music industry professionals Karen is speaking to, the number of ‘variants’ made per record release may fall in 2023. So, instead of pressing a record as a super deluxe version, a standard version and in six colours of vinyl - plus cassette and CD - it may be made in just two or three of these options. She explains, “There seem to be two schools of thought. Some people I speak to say there’s no sign of any let-up - customers want all the variants they can buy. And because that helps drive sales which boosts chart positions, you can see the advantages of keeping up the level of choice, strategically speaking.”


‘BACK TO THE FUTURE’: WILL THE CD SHINE AGAIN?
Speaking of CDs, Karen points out that despite an assumption by some that this shiny, brittle format is on its way out, the number of CDs manufactured still far exceeds the number of vinyl records being pressed. CD demand remains stronger than many may estimate: In 2021, CD sales stood at £98.3m versus vinyl records’ £116.8m, but CDs are cheaper to buy (average cost: £9.52) versus vinyl records (average cost: £20.31). Indeed, CD sales have  remained consistently higher than vinyl by volume, and 2021 was no exception. In 2022, new releases by top vinyl-selling artists such as Taylor Swift, Arctic Monkeys and Slipknot saw significantly more CD sales than vinyl records. 

As a result, Key Production is considering increasing its capacity for CD manufacturing. Not only are CDs cheaper and faster to make, but, perhaps we have reached ‘peak vinyl’ whereby our desire for the warmer, analogue sound of vinyl has reached its highest point. The audio qualities of music on CD are ‘truer’ to the studio sound, with more detail thanks to their ‘compact’ digital aspects. Karen reflects, “I’ve been in this game long enough to remember the golden era of the single in the 1980s when a hit record could be pressed in just 48 hours, or be ordered and racked in the stores super fast, to the delight of all involved. That said, the quality of the record wasn’t always the best in terms of physical and audio properties. Many records would probably fail our own tests! And sound quality is extremely important to music lovers.”

So, could 2023 see the ‘CD bounceback’? In Karen’s words, “A lot of people still have CD collections which they keep adding to. People who own physical collections can see them on their shelf and know they can be played for years to come. I’ve heard about carefully curated Spotify playlists disappearing overnight if someone’s been hacked. Remember also that older cars have CD players. In addition, CD album artwork is certainly more satisfying than that offered by streaming platforms. Physical music is forever, and can even be passed on to new generations if it’s looked after carefully.”


‘VINYL IS POPULAR, BUT DON’T PRICE IT TOO HIGH’
Steve Bunyan is a catalogue music consultant who has seen trends come and go over decades. In his words, “I was worried that we might have reached peak vinyl sales as the industry runs out of classic albums to re-release to the vinyl collectors who’ve driven the 15 years of growth to date. [BUT] I changed my mind when I saw the incredible recent vinyl sales for Taylor Swift and Harry Styles. Midnights and Harry's House were the two biggest selling vinyl albums in the UK last year, heralding the arrival of a new generation of younger fans embracing the format. I'm sure every label is considering vinyl releases of new titles this year - regardless of the demographics of each artist's fanbase. Increased capacity and improving turnaround times from the manufacturers, and a healthy mix of retailers - including HMV, Amazon, artist webstores and the indies - will ensure there’s plenty of stock, and plenty of places to buy the vinyl. There are high margins and quick returns to be had for all stakeholders by targeting the collectability and limited manufacturing runs to artist fans.” However, Bunyan cautions that, “Everyone has to be careful about not pricing vinyl too high, or creating too many formats that smack of exploitation, but I think we will see continued growth in vinyl for some years now.”


WHAT MIGHT THIS MEAN FOR MUSIC RETAIL?
Megan Page, Head of PR at Record Store Day, the initiative set up in 2007 to get the public into local record stores to support smaller retailers and local artists, says, “It’s great to see vinyl enjoy another showstopper of a year in 2022, outselling CDs for the first time and generating more than £150m in sales. This is a milestone truly worth celebrating as it comes off the back of 15 years of solid growth in the UK. Indie record shop openings average 1 every 3 weeks, and superstar artists such as Harry Styles and Taylor Swift are introducing the format to a new generation of music fans. All things considered, we look forward to another promising 12 months for the format.”

Time will tell if Karen’s predictions come true, but the revolutions will continue, be they on a turntable, CD player or cassette capstan! In the meantime, Key Production will continue keeping up with demand and industry trends. The beat goes on: having been forced to cancel a much-anticipated 30th birthday celebration due to Covid, its team is currently planning its ‘33⅓rd Party’ - a nod to the number of revolutions per minute a turntable makes.


FACTORS IN PLAY
In summary, the physical music market landscape is being shaped by the following factors:
1. CONSUMER DEMAND: the ‘cost of living crisis’ means less disposable income for ‘luxuries’ such as music purchases. (Though for many, music is a necessity). Karen notes, “There’s talk in the industry of how much people are willing to pay for an album. I suppose at some point, they do become unaffordable, so we all need to factor this in.”
2. PRODUCTION COSTS: rising costs of production due to increased costs of raw materials, transportation, energy etc.
3. RISK-AVERSE LABEL STRATEGY: Lots of record companies have tried to address the long wait-times for vinyl delivery by ‘getting ahead’ and ordering their catalogue and catalogue re-orders to keep them stocked for the next few years
4. INCREASED CAPACITY: Lots of factories have new machines coming in now, at last. How long will it take to have an album pressed in 2023? “We are currently quoting around 3 months, but it varies from factory to factory, and the timeframe can change quite fast, so I wouldn’t want to make any prediction for the back end of 2023.”

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