“Sales of Music, Long in Decline, Plunge Sharply”

Standard

…or so runs the title of a WSJ piece published today yesterday, anyway.

The less bombastic lead paragraph notes that CD sales (little plastic discs apparently being synonymous with “music” in this 21st century) for Q1 2007 are down 20% as compared to Q1 2006. The article continues:

Apple Inc.’s sale of around 100 million iPods shows that music remains a powerful force in the lives of consumers. But because of the Internet, those consumers have more ways to obtain music now than they did a decade ago, when walking into a store and buying it was the only option.

Today, popular songs and albums — and countless lesser-known works — can be easily found online, in either legal or pirated forms. While the music industry hopes that those songs will be purchased through legal services like Apple’s iTunes Store, consumers can often listen to them on MySpace pages or download them free from other sources, such as so-called MP3 blogs.

There’s even a cool chart illustrating the horror:

Oddly enough, though, I also found another chart on the Internet, this one based on data directly from the RIAA. This one charts unit sales for vinyl (LPs/EPs), cassettes, and CDs over a 30 year period, from 1975 – 2005. Take a look:

You’ll note that downloads don’t appear on this chart. That’s in part because the original creator didn’t include that data, but also because downloads wouldn’t even register: the RIAA didn’t start reporting download sales until 2004 (i.e. after iTunes was introduced), and at 4.6MM units in 2004 and 13.6MM in 2005, album downloads would be an almost invisible smear in the bottom right-hand corner of the chart.

So there are of couple of interesting areas for thought here: for prior format shifts (vinyl to cassette, cassette to CD) the music industry was creating the curve, if not exactly ahead of it. The introduction of a new format happened while sales were still strong for the incumbent; while each new format likely cannibalized some unit sales from the older one, the chart suggests a a logical, and perhaps even somewhat forward-thinking approach to managing these technological changes.

In the current CD to download changeover (and yes, I’m taking it as gospel that CDs are on their way out), the music industry didn’t have a meaningful industry supported “new format” offering until about four years after CD sales had peaked. In essence, the music industry is complaining that a distribution format they grudgingly accepted less than five years ago isn’t making up for their losses elsewhere. Or to be precise, the many competing, mutually incompatible, consumer unfriendly electronic formats that the industry keeps tossing out there aren’t making up for the losses.

And then there’s “the album”…it may have slipped by you, but all of the data above covers album sales, and does not include singles or individual track sales. The RIAA provides data on singles/single track sales, as well, and that’s where this discussion gets interesting.

More on that this weekend, when I’ve had a little while to play with spreadsheets (and sleep), but here’s a little preview to get you thinking: in hard-media formats, albums are king. Only a few tracks are available as singles, and they don’t generate all that much money (in their best year, CD singles were responsible for about 3% of total CD revenue).

Electronic format, with most tracks available for download outside of the album? In 2005, single track downloads were responsible for about 73% of the revenue generated by download sales. Three quarters of the revenue…

  • hey – i saw this data too and was fascinated by it. i wrote up a piece on technology obsolescence using the same data: http://e-huned.com/2007/01/17/technology-obsolescence-curves-are-cool/

  • W.B. McNamara

    Huned –

    Interesting post — the similarity in each of the curves (prior to CD->digital, anyway) is totally fascinating. With more data on paid downloads becoming available, there should be some fun exploration possible there before too long.

    Thanks for reading.