[rack gear]

Originally Posted by initialsBB

These numbers just don't add up. If you divide $120B by an average per-unit cost of $12 you would get 10 billion units sold. At the peak of the industry only about one billion units were sold for CDs, cassettes, and vinyl combined. Do you honestly think that the current level of music consumption is 10 times what it was a decade ago?

Oops, here's why your numbers don't add up. Above you said that 95% of music is illegally distributed. What the article actually says is that 95% of digital downloads are illegal.

iTunes has sold about 5 billion songs over 6 years or so, or about 833 million units a year. iTunes has about 70% of the digital music market, we can roughly estimate that the entire digital market moves about 1 billion songs a year. So those 1 billion songs are the 5% of the market, and if the 95% illegal downloads were paid for the total market would be about 20 billion songs a year, or $20 billion at 99cents per unit. Not $120 billion.

And even that $20 billion is an unrealistic best case scenario. That amounts to somewhere around 2 billion albums, or double the sales at the peak of 1999. So yeah, people consume more when it's free. No way are you going to convert them all to paying customers though.

good points. thanks. I'll look into all that. one quick note is that I don't think the 95% is limited to digital songs - it's songs and albums. but I'll double check that as well.

even if your numbers are correct, it would still show that managing piracy to even just a "good enough" degree yields significant gains for legitimate sales.

RESOURCES - IFPI publishes Digital Music Report 2009

Despite these developments, the music sector is still overshadowed by the huge amount of unlicensed music distributed online. Collating separate studies in 16 countries over a three-year period, IFPI estimates over 40 billion files were illegally file-shared in 2008, giving a piracy rate of around 95 per cent.

this from the PDF:

Collating separate studies in 16 countries over a three-year period, IFPI estimates
more than 40 billion files were illegally file-shared in 2008, giving a piracy rate of around 95 per cent.

Scary Stat: Album Sales Down 54.6 Percent Since 2000... — Digital Music News

Rough Decade: US-Based Albums Tanked 60 Percent In the 2000s... — Digital Music News

Album Sales Collapse As Digital Downloads Top 40% Of Market – 24/7 Wall St.

Album Sales Collapse As Digital Downloads Top 40% Of Market
Posted: January 7, 2010 at 5:46 am

Digital downloads accounted for 40% of all music sales in 2009, according to Nielsen SoundScan. But, that was not enough to stop an overall drop in sales whichreached 13% compared to 2008.

According to The Wall Street Journal, “Domestic album sales, including digital downloads, fell to 373.9 million units, a decline of 13% from 2008.” The increase in digital sales surprisingly rose only 8.3% for the year.

The drop on the sales of physical albums was expected. The slow increase in song downloads was not. It poses a threat to the ongoing success of services like Apple(NASDAQ:AAPL) iTunes and may eventually affect sales of multimedia players including the iPod.

There are several reasons that digital download sales did not do better last year. The first one is clear and that is the recession cut into the ability of people to pay for almosteverything, even inexpensive entertainment. Sales should rebound in 2010 and 2011 if that is the case.

The more sinister problem is piracy. The IPFI, which represents the global music industry, reported early last year that illegal downloads were 95% of all consumer album and songusage. The organization said it would continue to pressure ISPs to find individuals who run software services that are used to steal music without payments to publishers andartists.

The level of piracy identified by the IPFI is much too great to be lessened much by better monitoring systems and persecution of law-breakers. It is too easy for people to us PirateBay and other illegal download services. Consumers have little or no qualms about listening to music that they have not paid for.

The leave the music industry to face a problem. Digital album sales may never grow quickly again. Piracy may be plaguing the business more and more each year.

Douglas A. McIntyre

sooo

Digital downloads accounted for 40% of all music sales in 2009, according to Nielsen SoundScan. But, that was not enough to stop an overall drop in sales whichreached 13% compared to 2008.

40% of 6 Billion = 5%... so that's 2.4 Billion Dollars is the 5% base... ok let's work off of those numbers... calculate and add to the remaining 3.6 billion in physical product sales.