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March 20, 2007
CDs Join CRT TVs in Negative Hypergrowth
A must-read piece in the WSJ tonight cribs from new Nielsen Soundscan music sales data to show the accelerating decline in the music industry. Shades of what is happening in CRT televisions, sales of CDs are currently off 20 percent, year-over-year. While digital music sales continue to pick up, that doesn't make up anywhere near the difference.As you might expect, people are responding to these changed incentives:
Jeff Rabhan, who manages artists and music producers including Jermaine Dupri, Kelis and Elliott Yamin, says CDs have become little more than advertisements for more-lucrative goods like concert tickets and T-shirts. "Sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream," says Mr. Rabhan. "It's the vehicle that drives the tour, the merchandise, building the brand, and that's it. There's no money."And the story gets more data-rich and sales-poor from there. Consider this:
In recent weeks, the music industry has posted some of the weakest sales it has ever recorded. This year has already seen the two lowest-selling No. 1 albums since Nielsen SoundScan, which tracks music sales, was launched in 1991.
One week, "American Idol" runner-up Chris Daughtry's rock band sold just 65,000 copies of its chart-topping album; another week, the "Dreamgirls" movie soundtrack sold a mere 60,000. As recently as 2005, there were many weeks when such tallies wouldn't have been enough to crack the top 30 sellers. In prior years, it wasn't uncommon for a No. 1 record to sell 500,000 or 600,000 copies a week.
Fascinating, and it should be eye-opening for folks in television and movies. Sadly,however, both groups want to take the wrong message from this -- piracy is killing our business -- when the truth is that the business is changing and media companies need to change with it. I'm no apologist for piracy, but there is no point in pining for business as usual when a) consumers don't want it that way, and b) technology has made new and more appealing ways of selling media possible.
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I agree with your conclusion 100%. To me, the biggest source of resistance from the music industry lies in two areas. One is that their investment in CD-production facilities have been fully amortized and so the marginal cost of producing CD's is trivial. Protecting those CD profit margins is at the top of their list. The second source is the traditional system where A & R people would spend tons of money on throwing promotional parties, expense account meals, payola and so forth. These people don't want to see their gravy train derailed. The system for getting music to listeners has rendered the CD distribution system completely obsolete; I would venture that the CD-duplication plants are essentially scrap at this point.
You are dead on there on both counts, Scott.
All the tough talk on piracy is ultimately ephemeral to the core of what really frightens the music industry about downloads: artists no longer need the label to market them to consumers, they can do it themselves.
As an aging hipster, much of the new music I'm exposed to comes to me from the internet, often directly from the artists themselves, without the marketing intermediary of a label. Lately I've been clued in to more new artists via YouTube than from listening to the radio, truth be told.
Not to shamelessly self promote, but this is one of my hobby horses. Thanks for posting that piece!
http://businessopinions.blogspot.com/2007/03/compact-disc-sales-in-tailspin.html
Way back in 1999, a friend and I concurred that mp3 wasn't just going to go away, and the record companies needed to embrace the new technology, get a grip on it, and start making money with it.
But hey, what the hell do we know?