Music's lost decade: Sales cut in half

[EddieTheRed]

Originally Posted by haymedic

they only earned 6 and a half BILLION dollars

Not they, we.

[DontLetMeDrown]

Originally Posted by Sounds Great

Music's lost decade: Sales cut in half

LOL at the graph of BILLIONS. This is the worst graph anyone could use to make people feel bad about piracy.

[Lrmusic]

Originally Posted by DontLetMeDrown

LOL at the graph of BILLIONS. This is the worst graph anyone could use to make people feel bad about piracy.

What else they could use..."x 10^9" ?

[Dean Roddey]

That's an entire industry. The current market capitalization of General Electric is 177.6 Billion dollars. So that's a single company that is valued at more than thirty times the entire record industry gross revenues at this point.

I think that one of the biggest single problems with this whole thing is that vast majority of people out there are economic pinheads who have no idea how business works. They see $6B, they think what they could buy with that, therefore the record industry must be rolling in money.

They obviously can't comprehend that that's the whole industry gross revenues, so it's spread out over a lot of companies, and that it's gross revenue, not profits, and it's a business not just a couple guys getting $6B. And that it's actually a fairly small industry as such things go. GE has had that much IN PROFITS in a single year.

[oudplayer]

Originally Posted by Dean Roddey

Here is a graph by unit sales, not by dollars, which covers 1975 to 2005. Actually it's probably worse by dollars because the sales price of CDs in 1985 dollars is in and of itself 2.5 times lower now because the price hasn't gone up while inflation has, and the actual prices have come down a lot.

Sales did not continue to do well. If you look, it was going up rapidly and had been for a long time. Just going flat would have been a big drop. To have turned around suddenly was a massive drop.

Swivel | U.S. Music Sales, 1975-2005: Vinyl, cassettes, and CDs

So let's analyze that diagram. Looking at total units sold, there was only slight growth from the 1970s through 1992. The spike of 1992 to 2003 parallels the stock market spike during the same period. By itself, the data here is quite unremarkable. Other indexes went up and down to the same extremes during the same period. If one didn't know about "extenuating circumstances," and was simply looking at raw units data, one could be excused for advancing the hypothesis that a sector that had grown too fast was going through a period of "correction."

This diagram in no way proves any relation between any set of illegal practices (napstering) and a resultant economic effect. We'd need other hard data to help that argument. At a minimum, we'd need to see studies which look at economic activity within numerous controlled groups (i.e., "self-described music buyers of the 1990s") and trace what happens to their actual buying habits. We'd need to analyze music collections and listening habits (there were some good exhaustive studies of this in the U.K. done in the 70s through early 90s, but I've seen fewer recent ones by the same institutes). With many many such studies in place, we could start to correlate relevant data.

To clarify, I'm not dismissing the argument that illegal downloading might have had a significant economic effect. I personally haven't seen hard data which supports the hypothesis (nor compelling data which refutes the hypothesis), but perhaps such data will become available. This particular data isn't it, though. Unfortunately for the case, there's a lot of "evidence of absence" and "proof by assertion" style logic arguments that are masquerading as legitimate economic analysis (this is true both for the pro-downloading camps and the music-industry-supporters camps), and this is "clouding the data" so to speak, making determination of causality dependent upon an excessive number of dependent variables. I have seen quite a bit of "informal" evidence in particular music sectors - for example, parts of the Middle East where downloading is nearly totally unregulated, seemingly widespread, and the music industries have dropped more than 80% since 2004. Even then, there are no concrete downloading statistics, so we really don't have the complete picture nor the necessary hard data.

My personal interest is in attempting to figure out what music is actually worth (i.e., the size of the entire sector) and how much related economic activity exists around music, and whether in light of that we can say that music itself is increasing or decreasing in importance as part of global and local economies. I personally think music *should* be worth a lot, but I don't get to determine that all by myself!

P.S. - also complicating things, the development of hybrid businesses (i.e., myspace), which had at one point a large market capitalization, but is not necessarily categorized as a "music business." There has been a lot of moving of resources around to new media, so even determining the size of "The Music Industry," whatever that is, has become much more complex than adding together soundscan data.

[Dean Roddey]

Obviously it doesn't prove it. But of course no proof will ever be accepted, no matter what it is or who it comes from. BTW, the stock market ramp up didn't really begin until 1995. It was going along at a fairly steady but slow rise until then. But CD sales were going almost straight up. Even after CD sales took over from cassettes, in 1991 after it was long since a new toy just for the rich, the number of units purchased more than doubled between then and 1995 before the stock mark ramp up of the internet bubble.

The end came effectively in 1999, where in the middle of a huge bubble, sales flattened out significantly. So it went up a lot during the period of regular growth. And even just between 1995 and the drop off at 1999, it went up another 200M units per year. Napster opened it's doors in 1999.

Ever since then downloading has grown massively and legal sales have fallen massively. Everyone knows that kids have iPods full of stuff they never paid for. That's not proof, but of course if this was not something that everyone wanted to deny, people would be all over it. If there was even a fraction this much 'evidence' that the music industry was doing something wrong, it would be plastered all over the entire internet and would be a known proven fact by now. If it was us individually who were being treated thusly, this would be the 'prove it's wrong' scenario, not the prove it's right, as it should be when anyone is being denied their rights.

[Sounds Great]

Originally Posted by DontLetMeDrown

LOL at the graph of BILLIONS. This is the worst graph anyone could use to make people feel bad about piracy.

That is just unfounded justification for stealing. Do you know how many careers those billions support? The only number that matters is the amount of the reduction. That represents lost jobs, and reduced quality of the product.

Compare to the movie business for example, these days the entire music sales of 6 billion could be equaled by a few block buster movies.

[Jay-]

perhaps every one has already updated all their clearance Clearwater revival from Records >> Tape >> CD?

[Dean Roddey]

Originally Posted by Jay-

perhaps every one has already updated all their clearance Clearwater revival from Records >> Tape >> CD?

Obviously a certain amount of back catalog sales always goes on and a lot of it went on early on the CD ramp up phase. But there was lots of new music beind sold in the 90s.

[rack gear]

my apologies to the OP of this thread for diverting conversion to music business.

seems to me this subject is best served by as many as possible.

I will put in the first post there a link to this thread.

[DontLetMeDrown]

Originally Posted by Sounds Great

That is just unfounded justification for stealing. Do you know how many careers those billions support? The only number that matters is the amount of the reduction. That represents lost jobs, and reduced quality of the product.

Compare to the movie business for example, these days the entire music sales of 6 billion could be equaled by a few block buster movies.

Whoa take it easy there partner. I haven't stolen a thing and I do NOT condone piracy.

Originally Posted by Dean Roddey

That's an entire industry....

I think that one of the biggest single problems with this whole thing is that vast majority of people out there are economic pinheads who have no idea how business works....

GE has had that much IN PROFITS in a single year...

Hmm thanks for insulting me Dean. Is that really necessary? tutt Grow up bro, seriously. You're better than that.

The fact of the matter is that the music industry WAS rolling in money, but now only the best and most determined people will survive. I'd have to say YOU are an economic pinhead if you truly believe that the music industry is somehow as important as, or even comparable to a company that provides ELECTRICITY. Nice analogy pal-- are you for real? GTFOH

You guys read WAAAAY too deep into what I said. Did you notice the SMILEYS???

[GearBit]

Originally Posted by DontLetMeDrown

LOL at the graph of BILLIONS. This is the worst graph anyone could use to make people feel bad about piracy.

LOL.
Lemme guess. US education system? Dropout?

If you can't grasp a number like "billion" as it relates to an industry that serves the music consumption of an entire nation of 300 million then you really shouldn't be involved in this or any discussion where scale is involved.


One MILLION dollars!

[rack gear]

Sweden sees music sales soar after crackdown on filesharing | Business | guardian.co.uk

carry on...

[15ips]

Originally Posted by Sounds Great

Looks like a little dead cat bounce around 2006 or so before utter disaster...

[oudplayer]

Originally Posted by redvelvetstudios

Sweden sees music sales soar after crackdown on filesharing | Business | guardian.co.uk

carry on...

I remember when that study came out - that's one of the few correlations that's well documented.

Originally Posted by Dean Roddey

Obviously it doesn't prove it. But of course no proof will ever be accepted, no matter what it is or who it comes from.

Dean, you're obviously very passionate about this issue, and you obviously have convinced yourself of the correlation. I'm not interested in dissuading you from that. However, to make any progress on the issue it is imperative that we move towards more comprehensive data that shows a more compelling correlation. The RIAA studies have done a horrible job of supporting the RIAA position (and whatever interests that represents). It's pseudo-economics, pseudo-science. It doesn't have to be this way. Things like the Sweden study just re-linked up here are a positive if minuscule start, because they have a well-defined control group and so far there has been little legitimate challenge of the findings, since the study's methodology was sound. So I believe you're wrong that "no proof will ever be accepted." Better data, better analyses of that data, will be much more likely to be accepted en masse, at least by the people who count.

[DontLetMeDrown]

Originally Posted by GearBit

LOL.
Lemme guess. US education system? Dropout?

If you can't grasp a number like "billion"...

Not a dropout. Nothing I typed would indicate that. Read it again smart guy. It was a joke.

[Dean Roddey]

Originally Posted by DontLetMeDrown

The fact of the matter is that the music industry WAS rolling in money, but now only the best and most determined people will survive. I'd have to say YOU are an economic pinhead if you truly believe that the music industry is somehow as important as, or even comparable to a company that provides ELECTRICITY. Nice analogy pal-- are you for real? GTFOH

You guys read WAAAAY too deep into what I said. Did you notice the SMILEYS???

Well, I don't think that General Electric primarily provides electricity these days. It makes electrical gadgets (ovens, aircraft engines, industrial equipment, and that kind of thing) plus they own a lot of other stuff. But that's not really the point. If the point is that the music industry is quite small in international business terms, and profits are profits. It doesn't matter what you are making. If you have $5B in profits at the end of the year, that's $5B in profits, i.e. $5B you charged more than it cost you to make what you make. But no one seems terribly worried about that. They are all obsessed with the record industry, which is tiny in comparison to single companies out there, with profits that are tiny in comparison.

[uncle duncan]

Someone mentioned cars earlier. So lets imagine some locksmith dude figures out a way to make a universal ignition key, and he puts it on the internet so that anyone can unlock anybody else's car and take it. Permanently. Not only that, but he figures out a way to erase the car registration, so that it's impossible to prove where it was stolen from or who it originally belonged to. How is that going to affect car sales? Are people still going to buy new cars when they can just walk down the street, pick out a new car, and drive it away without having to pay for it?

Now, if there was a graph showing profits from car sales, and that graph took a nose dive right after the universal ignition key came out, would you blame the lost sales on Detroit for making ugly cars, or would you blame the lost sales on the availability of free cars?

(Hint: The answer is not ugly cars, although I suspect a sizable number of participants in this thread will pick that answer.)

[Dean Roddey]

Originally Posted by oudplayer

So I believe you're wrong that "no proof will ever be accepted." Better data, better analyses of that data, will be much more likely to be accepted en masse, at least by the people who count.

Actually it was the 'people who count' that I was talking about. Ultimately the people who count are the people who are going to download or not. I doubt very seriously that there will ever be any acceptance of any proof, ever. That would require that they actually accept that they are the evil ones. Of course most of them don't even think about it at all, other than to throw out a standard rationalization once in a while if questioned. And then it takes someone like me hours upon hours to argue down this one person and convince them that they are full of internet mythology BS. And as soon as that's done, someone else will show up in the thread and make the exactly same arguments again.

I do believe that intelligent and intellectually honest people would accept such hard proof. But let's face it, that's like what percent of the music consuming population? A huge number of them are young people who could give a crap. To them anyone who makes Youtube take their stuff down is an evil rich bastard.

[Coldbricks]

Originally Posted by DontLetMeDrown

LOL at the graph of BILLIONS. This is the worst graph anyone could use to make people feel bad about piracy.

Yeah. What's your point? That's not a lot of money for a major industry. Not at all.

By way of comparison, the telecom industry, which you are using as you read this, brings in about $3.8 TRILLION dollars annual revenue (3,800,000,000,000) in the United States. Defense industry (think Boeing, Lockheed, Raytheon, etc) was $2.2 TRILLION. Prescription drugs were about $700 BILLION. the airline industry was hit extremely hard last year, too. Revenue was about $140 BILLION. Album sales? 6.3b

So, our industry is itty itty bitty. Don't kid yourself.

[haymedic]

if you want to measure something as spiritual as music in the form of billions of dollars on a bar graph, maybe you should rethink what it was that made you interested in music in the first place.

s

[Dean Roddey]

Originally Posted by haymedic

if you want to measure something as spiritual as music in the form of billions of dollars on a bar graph, maybe you should rethink what it was that made you interested in music in the first place.

s

If you want to eat and have a place to live and put your kids through school and buy them good medical car, as a musician, maybe you should try buying them with spiritual money?

[rack gear]

....

[Lrmusic]

Originally Posted by CuminGingerSpice

Yeah. What's your point? That's not a lot of money for a major industry. Not at all.

I feel reluctant to defend someone with such a confrontational attitude cuz I'm so chill, but maybe he's not trying to say that something on the order of 10^9 $ is a lot of money for an industry...maybe he's just trying to say that a casual observer is going to think "hmm the are still making billions of $ why should I care."

[haymedic]

Originally Posted by Dean Roddey

If you want to eat and have a place to live and put your kids through school and buy them good medical car, as a musician, maybe you should try buying them with spiritual money?

yes... that's what i'm saying. i want to see musicians suffer. give me a break.

i don't think the 'poor me' card works when you talk about the industry only earning 6.3 billion dollars. a lot of musicians out there didn't see a cent of that money but still have to make ends meet.

s

[PeeWeeGee]

I think Dean and many others are missing a few very relevant points here:

1. As someone previously stated, the music industry (like many others) is/was bloated with fat-cat, self-justified middle men. Layers and layers of hands-off management that focused ONLY on QoQ revenues and maximizing profits. (Sounds like the oil industry, huh?!)
2. The advent of internet downloading and a direct line to the paying consumer has effectively outmoded those roles. MySpace, YouTube, and web visits provide the top execs with the feedback they need to determine "what's hot".
3. Guerrilla marketing via the internet has proven to be competitive with the highest budget video shoots and promotions schema. These days, it comes down to market savvy and creativity.
4. Your metrics don't include the revenues lost from artists who have decided to circumvent major labels and go indie. Can you post a graph showing Indie record sales and profitability? It would make for an interesting comparison, I'm sure.
5. While production and distribution costs have decreased exponentially, product sell prices have remained level or increased over the same period. Could that be a factor of dwindling marketshare? Maybe the consumer is smart enough to know that a shift to cheap media should reflect a shift in pricing.
6. The self-aggrandizement of the artists and music heads (mansions, yachts, diamonds, etc.) don't endear them to their consumers. As with pro athletes and other outrageously high salary jobs, there is a threshold where blue collar folks don't feel the need to continue to support the excesses of these guys. Right or wrong, the psychosis is real and anyone with market sensibilities SHOULD take that into consideration.
7. Major labels still give paltry percentages to the artists; even though today's game require that they come with a ready-made fan base, web presence, defined image, and performance background. These are the some of the things that labels USED to offer artists. If the ratios of input have changed, why haven't the ratios of profit?
8. The means and avenues to create an iTunes-like service has always existed equally for the labels. However, they OVERTLY chose to resist change. Consequently, they are BULLDOZED by it. It sounds a lot like how Sears was effectively destroyed by Wal-Mart. Failing to adapt is usually the last act of a dead industry.

None of these points are justification for online theft. Stealing is stealing - period. But I think you (and others) are being disingenuous when you present the labels' "tale of woe" like they are the victims of some great conspiracy. They are playing a HUGE part in their own demise.

[GearBit]

Originally Posted by PeeWeeGee

But I think you (and others) are being disingenuous when you present the labels' "tale of woe" like they are the victims of some great conspiracy. They are playing a HUGE part in their own demise.

I'm not sure anyone is presenting this as a "tale of woe" for the major labels or suggesting any kind of conspiracy and putting those words in our mouths is not really making your argument appear honest.
Fact of the matter is there was a fairly lucrative middle class that existed within the music industry and within major labels. Major labels had developing artists with moderate budgets that paid producers, studios and engineers. Those mid level budgets got their money from the super huge artists. Yep. All of the super popular crap that most here hate was where the money came from for the development and exposure of all of the more interesting sub-popular music. It really shouldn't require a masters in logic to understand that when that money starts drying up the labels will be focusing their resources on whatever can make the most money possible.

The self-aggrandizement of the artists and music heads (mansions, yachts, diamonds, etc.) don't endear them to their consumers.

Maybe you don't live in america? Maybe you don't remember the hugely popular show "lifestyles of the rich and famous"? Maybe you haven't seen "cribs"? Maybe you have never seen a rap video or heard of a word called "bling".
I assume that you haven't because if you had you would have not typed that statement.

Major labels still give paltry percentages to the artists;

Fvck that repetitive ill informed note.
If an artist held onto their publishing they could make a fvckload of money (note I used the past tense as 360 deals are now the norm). It's precisely how I turned a profit with a major label deal and they ended up hundreds of thousands of dollars in the hole.

[gold sounds]

Originally Posted by Dean Roddey

And the belief that those 'non-music' people were just leaches is just flat out wrong. The ONLY time that artists have really made any significant money is under the label system. Without some organization behind arists, they are forever just lost in the noise, because actuall SELLING the music you make takes money and marketing.

Um, look at any band on the jam band circuit, look at Radiohead now without a label (live revenues particularly), hell look at the always awful Insane Clown Posse. These are bands without labels who are making lots of money. It may not be hookers and blow money from the good days, but I'm happy that musicians aren't rewarded with money waterfalls anymore; it helps keep everyone humble and working harder to just care about the music.

[Dean Roddey]

Originally Posted by gold sounds

Um, look at any band on the jam band circuit, look at Radiohead now without a label (live revenues particularly), hell look at the always awful Insane Clown Posse. These are bands without labels who are making lots of money. It may not be hookers and blow money from the good days, but I'm happy that musicians aren't rewarded with money waterfalls anymore; it helps keep everyone humble and working harder to just care about the music.

And why do a lot of people know who Radiohead are? Because they were on a major label who marketed them heavily. Same with NIN and others who got their visibility on the label's marketing dime and now are able to go out on their own, because people already know who they are.

So who out there is as big as Radiohead (who isn't THAT big either) without ever having been with a label?

[Dean Roddey]

While production and distribution costs have decreased exponentially, product sell prices have remained level or increased over the same period. Could that be a factor of dwindling marketshare? Maybe the consumer is smart enough to know that a shift to cheap media should reflect a shift in pricing.

CDs have not gone up in actual dollar amount since they came out. Inflation has gone up 2.5 times in that period, plus the actual dollar amount is now considerably lower for most CDs. So the real money cost of a CD is probably 4x or more lower now than when they cam eout.

As to production and distribution costs decreasing exponentially, I don't think that's the case. Yeh, I can make something in my apartment for expoentially less than what it took to make Chinese Democracy. But it's still not cheap to do it really well.

So maybe the consumer doesn't have a clue about economics and missed the fact that a CD costs generally like $12 or so now and cost maybe $15'ish on average back when they came out (which would be $40'ish after inflation is factored in today), while a car in 1985 averaged $6000 and now averages $16,000?