Downloads go up, CDs go down
Further evidence that the record industry is in need of a radical pick-me-up came when the Recording Industry Association of America released its stats for 2007.
The good news: digital formats now account for nearly a quarter of all US music sales, with a headline figure of 809.9 million paid-for song downloads, a whopping 38 per cent increase on 2006.
The bad news: CD sales continue to slip and slide, down 17.5 per cent on 2006’s figures.
The really bad news: while sales volumes may be up, revenue is down 11.8 per cent on the previous year. That means less money in the pot, less money to invest in new bands and less money to pay the wages.
isn’t this inevitable? CDs were predominantly album sales, 4 good tunes and 12 fillers; downloads are predominantly single tracks.
The only way I could see to avoid it would be to increase single-track prices across the board while keeping full-album prices stable. But that would take an impossible degree of coordination and agreement by the music stores…
Comment by Justin Mason | May 2, 2008 at 10:19 amjustin - the problem is that trad record label economics is based on the take from an album.
Lets say the label gets 8 euro when you buy a CD album release. With downloads, your four downloads will only net the label 2 euros (50 c per track - again, for argument sake only). Therefore, there’s a six euro shortfall which the labels are scrambling to make up.
Sure, their profits are down but it also impacts on their budgets to sign and develop new acts, pay for the VP for This, That And The Other and pay tour support and studio bills for existing acts. Yes, a lot of this is waste which should be culled, but the shortfall also impacts on the good stuff label do AND smaller, smarter indies too.
Comment by Jim Carroll | May 2, 2008 at 10:25 amThe labels really need to find more distribution points and be smarter with how they use their marketing budgets, focus more on acquisition and less on awareness.
On the 1st point, with the online capabilities featured in GTA IV, for example, there is no reason why gamers can’t purchase songs during the game.
If Dominos can sell pizzas to gamers, labels can sell songs.
Also, what is the point of buying TV ads to tell someone an album is on sale?
Additionally, what is the point in advertising REM’s new album or Madonna’s new album? They have a proven track record, they will sell without a massive marketing campaign.
Comment by markg | May 2, 2008 at 10:35 ammarkg - actually, GTAIV users can buy those tracks when they’re playing (as well as on the soundtrack, I assume?).
From the Billboard article I linked to in the GTA post:
Comment by Jim Carroll | May 2, 2008 at 10:46 amAdditionally, what is the point in advertising REM’s new album or Madonna’s new album? They have a proven track record, they will sell without a massive marketing campaign.
The thing is with those two artists, and generally tv advertised albums, is that the ads are targeted at people who don’t go into a record shop from one end of the year to the other and probably buy the album in Tesco. These people may not even know there’s an REM or Madonna album out without seeing/hearing the ads - they don’t read music blogs, or even the Ticket and they are most likely to play the album in the car on the way to work. Music just has a different place in their lives. I always see it as the divide between people who go to the counter and ask for an album or those who look for it in the racks.
Comment by Ivor | May 2, 2008 at 11:20 am‘no reason why gamers can’t purchase songs during the game.’
god, what a great idea. I would have spent a fortune in Vice City if this was possible. “New York to East California / there’s a new day coming, I warn ya”, classic…
Amazon’s mp3 store is still US-only, though, right?
Comment by Justin Mason | May 2, 2008 at 11:29 amthey don’t read music blogs, or even the Ticket and they are most likely to play the album in the car on the way to work
I hate those people
Comment by Jim Carroll | May 2, 2008 at 11:49 amThere’s no doubt that the concept of buying an album of songs and those songs all being important to each other and the mood/theme of the piece of work, is dying out. The younger generation of casual music fans are interested in individual songs, not albums. People who are really into the music of a specific artist regardless of generation however, will always want a full album…and that will probably exisit on cd for a long time yet.
I think it’s really interesting to see a lot of major acts singing deals with LiveNation instead of the traditional record company. Touring and all the merchadise thats goes with it, is where the money is in music these days, not in album or singles sales
Comment by Keith | May 2, 2008 at 12:17 pmJim,
Do have any idea of how sales these days compare with sales in the pre-CD era? I have always wondered whether sales were artificially high during the 1990s as labels repackaged and reissued their back catalogues and as people bought CD versions of their old vinyl, and i wonder whether sales are settling back to their old level based on new releases. I’ve never been able to get stats to prove or refute my theory, but i thought that you, as our resident music industry gumshoe, might know.
Ta,
Ro
Comment by Mumblin Deaf Ro | May 2, 2008 at 12:25 pmApologies Jim, I hadn’t fully read the billboard article. At last some sense is prevailing.
Ivor, if these albums sell more in Tescos, the marketing should be heavily focused on point of sale, not TV.
Comment by markg | May 2, 2008 at 12:41 pmkeith - thing is, MUSICIANS still want to make albums despite consumers demonstrating a per-track appetite. There was an interesting exchange earlier in the year during the roundtable intv conducted by John Meagher in the Indo for the Choice Music Prize. He asked the acts did they envisage a day when albums would disappear and to a man and woman, they said no. http://www.independent.ie/entertainment/day-and-night/features/choice-cuts-1290248.html
Ro - have a look at this - http://76.74.24.142/81128FFD-028F-282E-1CE5-FDBF16A46388.pdf - it has the figures for US music shipments since 1997. I’ll dig around for other figures and see what comes up.
markg - no worries, I should have pointed to that piece in the original article but due to the confinements of print, I had only 350 words for the piece and concentrated on other stuff.
And surely Warner Music have splashed out a lot of cash on point of sale posters and the like for their Madonna and REM campaigns?
Comment by Jim Carroll | May 2, 2008 at 3:05 pmThe record business is expensive these days. Just ask this chap:
Comment by Matt Vinyl | May 2, 2008 at 3:27 pmhttp://www.guardian.co.uk/world/2008/may/02/usa1
Love this line
“Staff at the Fort Worth bank were immediately suspicious, according to investigators — perhaps it was the 10 zeros on a personal cheque that tipped them off.”
Comment by Jim Carroll | May 2, 2008 at 3:29 pmThanks for the link Jim.
I dug a bit further and got stats going back to 1990 here:
http://76.74.24.142/DB3DF11A-E271-5BE1-88F0-32D289C741BF.pdf
The interesting thing is that the total value of physical sales in 1990 was $7,541mn, roughly equivalent to the figure for 2007 ($7,495mn) - I am not sure if the figures are index-linked; if not, then physical sales today are relatively higher than in 1990.
These stats show that physical sales grew by 63 percentage points in the five years to 1995 (to $12,320 mn), which I am assuming is down to people replacing their vinyl collections with CDs and buying newly reissued back catalogues on CD etc.
If we make the assumption that the figures for the 1990s were artifically high because of a format change, then we can conclude that the baseline demand for physical sales hasn’t changed in 18 years. Interestingly, this makes the download sales of $2,875m for 2007 ‘new business’ rather than business that is replacing purchases of physical formats.
I’ll see if i can get figures for the 1980s to see if the 1990 figures are typical of the trend before the CD format change.
Rock n’ Roll!
Comment by Mumblin Deaf Ro | May 2, 2008 at 4:16 pmRo - Thats a good find! I don’t think those figures are index-linked (can’t find any footnote about it) but I think it would be fair to assume that your $7,541m in 1990 would have gone a lot further than your $7,495mn in 2007. It would have employed a lot more people, paid for a lot more recording sessions, signed a lot more bands.
Rock ‘n’ Excel spreadsheets!
Comment by Jim Carroll | May 2, 2008 at 4:27 pmAlso, if you look at the figures for the 1990s, CD sales outstripped cassettes from 1992 onwards, which lends weight to the argument that the 1990s boom was down to a format change.
Here are the inflation adjusted figures (red line at the bottom:
http://www.icce.rug.nl/~soundscapes/VOLUME02/Trends_and_shifts_Contents.html
2006 sales are roughly equal to the sales in 1992, which was the first year that CD outsold cassettes; also significantly higher (+18%) than the 1989 figure.
Comment by Mumblin Deaf Ro | May 2, 2008 at 4:40 pmWhat’s just as noteworthy from that last set of figures is that the record industry’s “best” year was 1999. I would have thought their best year would have been earlier, early to mid 1990s. The CD format pimping was still paying off handsomely just as Shawn Fanning began to appear in the rearview mirror.
Comment by Jim Carroll | May 2, 2008 at 4:50 pmLooking at those figures in comment 16, the value of mobile downloads is greater that standard digital album downloads. That is fairly shocking. Looking at the the trend of mobile downloads, it would look to match cds value in ‘99 in at least 2 years. With even more people getting iPhones and other web-enabled phones business should be well on the way to recovery. Seeing these figures puts all these “record industry woes” into perspective. Its nothing more than a temporal shift which they didn’t foresee. They should quit complaining and telling downloaders they are killing the industry.
Comment by leaveitout | May 3, 2008 at 1:06 pmSorry, should have said mobiles will match the value lost in CDs since ‘99.
Comment by leaveitout | May 3, 2008 at 3:53 pm