The Rise and Demise of America Online

When the internet became available to the non-technically savvy, average household, America Online was the leader in dial up service. Through the free availability of free floppy disks, and eventually CDs that provided AOL software and a few hours of free internet, AOL’s visibility in the internet marketplace was very high. In addition to the internet access, AOL provided its own dedicated browser and email provider, thus nearly monopolizing the market, at the time. In 1998, AOL acquired CompuServe and ICQ thus stamping out nearly all-additional competition in the market (Aol, 2010). By 1999, AOL’s revenue matched NBC’s and with a market value of $125 Billion, it was bigger than any other media concern in the world. The expressed goal of the company was ”To build a global medium as central to people’s lives as the telephone or television … and even more valuable” (Hansell, Now, AOL Everywhere, 1999). Basically, AOL’s goal, at the time was to be the equivalent of Microsoft to PCs—and position internet service to be just as valuable to the average American family as phone and television. With customer retention incredibly high and direct mailer marketing tactics, AOL succeeded in making the internet necessary for more and more people every year, permanently, and making themselves a world leader in internet, temporarily.

In 2000, approaching the height of the .com bubble, AOL bought Time Warner for $165 Billion dollars. Unfortunately, less than 3 years later AOL experienced its first decline in quarterly sales in its history (Hansell, As Broadband Gains, The Internet’s Snails, Like AOL, Fall Back, 2003). The decline coincided with the switch from dial-up service to much faster DSL and Cable internet services. Though AOL and its competitors (MSN, EarthLink, etc.) offered dial up services, many customers looked to their cable and phone providers because of bundled deals with phone and television service. In addition to its competition, AOL was positioned as internet for beginners, but by 2004, there were fewer and fewer “beginners,” “AOL built a huge and profitable business as a safe and easy place for people to get their first experience on the Internet. But it is now clear that the company stayed with that positioning too long after the majority of users were no longer novices” (Hansell, MEDIA; Beyond War News, AOL’s Broadband Plan May Face a Struggle, 2004). “With no frills access to the internet becoming cheaper, their bloated interface and lack of integration with stand-alone browsers left many users unhappy with the service”(Sams, 2009).

In order to shed this unsophisticated view of AOL, they recruited celebrities for their advertising campaigns in an effort to look relevant which, to many, appeared desperate. They began shifting towards content as its unique valuable service. “The AOL brand is associated with Internet novices, protective parents and chatting teens. It is not clear that the brand has what it takes to move beyond those groups to give Yahoo a run for its money (Hansell, Free or Paid? AOL Will Let Its Two Halves Duke It Out; In a Risky Reversal, An Effort to Cash In On an Online Ad Boom, 2004),” one independent internet analyst said discussing AOL’s portal service. AOL’s chat room services were a key feature in the early years of the internet to be replaced by social networking sites such as Friendster, MySpace and Facebook.

It was announced in 2007 that AOL would be moving its headquarters to New York, resulting in a layoff of 20% of its staff, known as “Bloody Tuesday,” which caused an internet backlash and a plummet of the company’s stock. While AOL did not have to reach the amount of visitors that rivals Yahoo! have they did have to work to get a readership high enough to acquire advertising revenue. Unfortunately, with the chief executives being changed and altered every few years the company lost credibility amongst its investors and when company’s such as Google retracted their investment in the company, the company’s outlooks for prosperity appeared uncertain, at best. In mid-2009, AOL parted ways with Time Warner. AOL’s shift to content had proved to e a unique feature, “Where Mr. Armstrong [CEO] will find much less competition is content, which most Internet companies find too expensive to produce. AOL already operates more than 70 specialized blogs, including Boombox (on hip-hop music), WalletPop (on personal finance) and Paw Nation (on pets)”(Hansell, Daring to Dream of a Resurgent AOL , 2009). AOL’s additional owned sites such as TMZ, MapQuest and TechCrunch, while lacking the AOL name ring in steady revenue for the company.

The biggest problem for AOL (who at the end of 2009 rebranded to Aol.) is that they were too slow to embrace change. By the time they were ready to shift their focus; others were around doing it faster, better and with better marketing tactics. AOL has consistently appeared as an old company attempting to appeal to a younger crowd while still maintaining their spokespeople as 40+ white males. Social networking sites took the place of chat rooms and instant messengers. Yahoo! cornered the content market, and with blogging being an integral part of the internet in the later years paid content made less sense, as newspapers and magazines discovered, as well. The best option for AOL now is to serve as a parent company to its more successful products such as MapQuest and TMZ and focus on making those sites the top of their respective industries. Thus, making AOL a content provider and filling a void instead of trying to take on a portion of the internet that has already been conquered.

Work Cited

Aol. (2010). Overview – AOL Corp. Retrieved December 5, 2010, fromhttp://corp.aol.com/about-aol/overview

Hansell, S. (2003, February 3). As Broadband Gains, The Internet’s Snails, Like AOL, Fall Back. Retrieved December 5, 2010, from The New York Times:http://www.nytimes.com/2003/02/03/business/as-broadband-gains-the-internet-s-snails-like-aol-fall-back.html

Hansell, S. (2009, July 22). Daring to Dream of a Resurgent AOL . Retrieved Dec 5, 2010, from The New York Times:http://www.nytimes.com/2009/07/23/technology/companies/23aol.html?_r=1

Hansell, S. (2004, November 22). Free or Paid? AOL Will Let Its Two Halves Duke It Out; In a Risky Reversal, An Effort to Cash In On an Online Ad Boom.Retrieved December 5, 2010, from The New York Times:http://select.nytimes.com/gst/abstract.html?res=F40A12FE345B0C718EDDA80994DC404482&scp=1&sq=AOL%20Will%20Let%20Its%20Two%20Halves%20Duke%20It%20Out&st=cse

Hansell, S. (2004, March 24). MEDIA; Beyond War News, AOL’s Broadband Plan May Face a Struggle. Retrieved December 5, 2010, from The New York Times: http://www.nytimes.com/2003/03/24/business/media-beyond-war-news-aol-s-broadband-plan-may-face-a-struggle.html?scp=1&sq=Welcome%20to%20the%20World%20Wide%20Wow%E2%80%A6.%20The%20AOL%20brand%20was%20perceived%20as%20not%20sophisticated%20and%20not%20necess

Hansell, S. (1999, July 4). Now, AOL Everywhere. Retrieved December 5, 2010, from New York Times: http://select.nytimes.com/gst/abstract.html?res=F00F17FA39590C778CDDAE0894D1494D81&scp=1&sq=Now,%20AOL%20Everywhere&st=cse

Sams, B. (2009, Nov 30). AOL debuts new logo. Retrieved Dec 5, 2010, from Neowin: http://www.neowin.net/news/aol-debuts-new-logo

Nielsen SoundScans

“Total album sales in this past chart week (ending Sept. 12, 2010) totaled 4.8 million unit—the lowest weekly sales figure since SoundScan began tracking sales in 1991.” 

Let’s put things into perspective:

It’s also only the second time the weekly album sales total has dipped below 5 million. Back in the record label hay day, the highest one-week album tally recorded during the Soundscan era was 900% higher at 45.4 million albums, in late December 2000.

Though album sales are in decline, general music sales are substantially higher than their past. Music sales exceeded 65 million in the final week of 2008, representing the biggest sales week in the history of Nielsen Soundscan. Therefore, it’s not that people aren’t buying music, people simply aren’t buying albums. Digital sales, ringtones, and singles continue to increase. Even vinyl sales are at a high from the inception of Soundscan in 1991, selling about 2 million copies in 2009.

Album sales at Non-Traditional music outlets (digital, internet, mail order, venue, non-traditional retailers) hit an all-time high in 2009 with sales reaching 110 million. Non-Traditional is the only strata that experienced album growth over the previous year; with an increase of 11% over 2008, and accounting for nearly 10% of overall music sales in 2009. The increase here can be attributed to a disconnect from major labels. More artists and independent companies are finding ways to bypass major label guidelines.

When you look at it from that perspective, things don’t sound that bleak until you consider this:

  • In the year 2000, 88 albums sold 1,000,000 units or more, and 202 albums sold 500,000 units or more.
  • Of the 97,751 albums released in 2009, only twelve of them sold more than one million units.

Going Diamond

In 1999, The RIAA added a Diamond Award Sales Certification for 10 million sales. Back in 1999, albums were actually selling 10 million copies. One of the  latest albums to be certified Diamond is Outkast’s Speakerboxxx/The Love Below, however; because the album was a double disc, each album was counted twice, thus only 5.5 million copies of the full album were actually sold.

Is a major label necessary to have an album chart? Vampire Weekend and Arcade Fire both were number one on the Billboard charts in 2010, both are signed to Independent Labels. VW’s Contra (released on XL Recordings home of MIA, The xx, The Cool Kids, and Sigur Ros) sold 124,000 copies in its first week. It must be noted that it was the only new release of the week in the Top 10.

When it comes to independent, there’s also the other side of the spectrum. Only 2,050 (or 2.1%) of 2009’s 97,751 new albums Sold Over 5,000 Units. With the internet, bands can cater to a much smaller niche audience, and may have other outlets to which they sell music that is not registered on Soundscan. In addition to those options, an artist may choose to release a record free of charge or sell the album through their own website and DIY shows. If you think about it, many bands have sold well over 5000 copies of their album during a summer stretch following Warped Tour, however; those numbers were never scanned.

Perhaps we should take a step back and understand how Soundscan works:

Sales data from cash registers is collected from 14,000 retail, mass merchant, and non-traditional (on-line stores, venues, digital music services, etc.) outlets in the United States and Canada. The requirements for reporting sales to Nielsen Soundscan are that your store has Internet access and a Point Of Sales (POS) Inventory System (a way to scan the bar codes of the products you sell). A simple text file, consisting of all the UPC’s sold and the quantities per UPC on a weekly basis is all that is required for submitting sales to Nielson. Because some retailers choose not to use Soundscan, sales from certain participating outlets are “weighted,” thus a single CD bought may be worth three on the charts.

Sales that occurred at churches, libraries, YMCAs, malls, campgrounds, public and private schools, offices, lawn and house concerts are all ineligible venue sites, thus will not be processed by Nielson. Purchases made by one individual in bulk for redistribution or gifts are also ineligible venue sales and therefore will not be processed. With these stringent guidelines, even if a band sells albums at many of their shows, most of the venues will not be eligible for Soundscans, unless the band is signed to a label that is registered. When bands do play at eligible venues, the sale numbers are often inflated because nothing needs to be “scanned” at the venues.

With all these issues, guidelines, and possible methods of fraud, a far more important question is, how relevant are Soundscans to the independent music world? On one hand, it may be difficult to get your album scanned, but it’s becoming easier and easier for bands to chart on everything from the Top 200 to the Heatseekers charts. A few thousand sales can put a band into public spotlight (if they’re the lucky 2.1%). What seems to be much more important now, though, are iTunes and other digital format figures. Digital seems to almost level the playing field for nearly every artist. Will these sales charts become more relevant to the major label than the physical charts?

Sources:

Business Wire The Nielsen Company Year-End Music Industry Report
Billboard.Biz
Nielsen.com