With all this talk of the future of the music industry today, it’s a great time to read Jim Wilcox’s terrific article in Sound and Vision looking at the various claims and theories as to why CD sales are down:
- it’s not surprising that the record industry sees downloading as the main cause of its ills. In a report issued last August, the RIAA placed the blame for the slump squarely on the shoulders of those who trade ripped files of copyrighted songs. The organization cited a survey, conducted last May by Peter D. Hart Research Associates, it said provided “the strongest evidence to date” that downloading is displacing sales.
….The RIAA also said that the total value of music shipments for all formats had fallen from a high of nearly $14.6 billion in 1999 to $12.6 billion in 2002. The number of CDs, cassettes, LPs, and so on shipped from warehouses fell 10.3% in 2001 and 11.2% in 2002. CD sales, by far the largest category in the statistics, dropped 6.4% in 2001 and almost 9% in 2002. These statistics for units shipped jibe with those from Nielsen SoundScan, which tracks actual retail sales. SoundScan reports that CD sales, which made up 94% of music sales in 2002, declined 8.7% that year.
….Ziemann researched the RIAA’s figures and came to very different conclusions, released in a much-circulated article, “The RIAA’s Statistics Don’t Add Up,” posted on his Web site. He makes two key assertions: 1) that the labels raised CD prices during a down economy, and 2) that they slashed the number of new releases by almost 25% during the past three years. He says that these factors, and not downloading, are responsible for sluggish CD sales.
….In Ziemann’s assessment, the combination of fewer releases and higher prices — not free downloads — caused sales to slump. His argument is bolstered by Josh Bernoff, an analyst at Forrester Research, who pointed out in a report issued last August that this isn’t the first time booming CD sales have plunged. For instance, during the recession in 1991 — long before anyone even knew what a download was — CD sales growth fell from 15% to 4%. When you consider that the country’s gross domestic product (GDP) declined 36% in 2002 and the S&P 500 dropped an equally depressing 28.78% during the same period, the recent 9% decline in sales doesn’t seem so dramatic — particularly for a format that’s been around for 20 years.
….That’s not to say that free downloads and file-sharing networks aren’t having an impact on the music business. In fact, given the usage statistics, it’s surprising they aren’t having a bigger impact. But they’re probably not the sole — or even major — cause of the industry’s woes. The irony is that, like other technological advances bitterly fought by the music industry — from player-piano rolls to the audio cassette — the Internet is probably its salvation. Forrester Research predicts that by 2007, 17% of the industry’s revenues, or $2.1 billion, will come from downloads. Jupiter Research’s projections are even rosier.