CCM:  Money and product continue to change hands for Christian music but in new and different ways all the time, of course. Have any of these “new wineskins” caused you to rethink how much CDs cost and what buyers pay for them?

JVH:  Pricing pressure is tremendous now, as the perception today (because of downloads) is that a song is worth 99 cents. Multiply that times 10 or 12, and you have a price point far below the 17 or 18 dollars that has been the standard for years. We’re going to hold up the price point as much as we can but not more than the market will allow. Frankly, the relationship between the record company and the artist has to change now as well. We can’t spend the kind of money on masters that we used to, or marketing, for that matter.

TH:  We have a 60-day introductory price on new artists, which has been fairly effective, but after 60 days we move to full price with little downside. Casting Crowns has been at full price for a year now and is still selling well.

JVH:  I fully believe CDs are going away as the primary delivery system of content. I don’t know when, but I believe it will happen; and therefore, there have to be multiple revenue streams at a company like Word, and the relationship with the artist has to be redefined. I still think there is a place for this type of company because most artists cannot become totally viable by themselves. But the way to help them succeed is changing.

CCM:  Let’s talk about digital media, downloads and the like. What are your thoughts about that area of the business currently, and what are you doing at your companies to take advantage of these new markets?

BH:  We have come to see that Christian music consumers are just as wired as any other music consumer and are consuming digital music at or slightly above the rate of mainstream music consumers.

We have been very aggressive in providing content to the digital service providers. As of this spring, we have over 1,000 full albums available on the DSPs, which means over 10,000 songs, all of our new releases and about 80 percent of our back catalog available digitally. Individual songs are running at about 80 percent of our total digital downloads and full albums the other 20 percent. We have about 60 ringtones available now and will have over 300 available by June. The prediction is that, while digital music will continue to grow exponentially, mobile music — ringtones, voice tones and images to cell phones — could surpass digital downloads in the next few years.

TH:  We have increased our alternative marketing staff to four, and those people communicate with their parent company counterparts on a daily basis about new opportunities and the like. Sony/BMG is the worldwide leader in the digital realm right now, and that includes ring tones, wallpaper, ringbacks as well as downloads. Ring tones for Casting Crowns are running about equal to their business in downloads right now, for example. Now we’re finding a demand for artists recording personalized messages for personal voice mail, and I think that fits well with the Christian music lifestyle.

JVH:  This is a huge priority for me. We know now that more than 10 million iPods have been sold; five million of those were sold just last quarter. And that does not include the new iPod Shuffles. I haven’t yet talked to a single individual who owns an iPod and doesn’t completely love it.

But the majority of sales in downloads is in individual songs, and we have to look at that very closely and come up with a new strategy to better accommodate a new type of buyer. Instead of looking for 10 to 12 songs to take into the studio with an artist, maybe we just record the two or three that really knocked our socks off and sell those when they’re ready, as opposed to an entire album. I don’t think we’re at that point today, but I think we have to be open to new approaches like that.