The Death of The Music Industry?

It’s not dead yet but it’s sales are down 64% from the peak in 1999. Sales in any industry is a bit like oxygen to a human. If your oxygen level were down 64% from its peak when you were younger you’d be on life support. The interesting part is where the music industry has derived its revenue over the last four decades or so and how that has changed. The sources have been, in chronological order, 8-track, vinyl, CD’s, cassettes, videos, and digital downloads.

In the charts and numbers I’ve seen, the measurement of how well the industry is doing is shown in per capita spending on music, not in total revenue to the industry. That may or may not be the best way to measure the health of an industry but apparently they assume music is such a universal commodity that the amount consumers are spending on a per capita basis gives an accurate picture. One can see that the methodology isn’t sound for goods that are not as widely purchased. Per capita spending for limburger cheese, for example, probably would not be much of an indication of how its producers are doing financially.

Anyway, per capita spending in 2010 for music is $26 compared to $71 in 1999 (in constant 2011 dollars). Wow, that’s a big hit. So why is this so? The main reason given, and this makes sense, is the advent of digital download purchasing of music which has relieved us of having to buy a complete album when we really only want one or two songs on it. Traditionally, music albums were sort of a tying arrangement where you could not buy a hot song unless you also bought 9 or 10 dogs that you’d never listen to. With the advent of digital downloads one can buy just the cut on the album you want. Thus, while you used to spend $10-$15 for one or two songs you can now get them for $0.99 each in most cases. Just look at the download intensity of most albums in the iTunes store. You will invariably see that one song is intensely downloaded and the entire rest of the album is dormant. That’s probably the best explanation for the steep decline in annual per capita spending on music.

Occasionally, an album will appear on iTunes that does not allow single downloading. Album only requirements are attempts to force the old tying arrangement on you, but it’s a prescription for no sales at all. For example, I like the music that opens the television series House. So I found it on iTunes (it was not an easy task). But it was only available if I bought the whole album. Great, I thought. If the rest of the album is as good as the House theme, I’d buy it. But they do let you listen to 30-second snips of all the songs. All the other album cuts were not only inferior, they were atrocious. In fact, only the first 30 seconds of the House theme, the part they play at the opening of the show, was good. It goes downhill from there. Way downhill. I mean, fingernails on a blackboard. No sale.

There may be other explanations. In 1999 CD’s sales were still high reflecting the fact that a lot or people were still in the process of replacing all of their vinyl with CD’s. Nobody’s doing that anymore and sales of CD’s would be down for that reason alone. Other reasons for the decline might be the result of the business idiocy of the moguls in the music industry. I think they have tended to focus on the wrong things. The are obsessed with piracy of their copyright and while that is certainly a matter of concern to them, they would sell more music if they cared half as much about the quality of what they produce. One reason the per capita method of judging the health of the industry may not give an accurate picture in that so many people have given up or greatly reduced their listening and purchasing of new music because so much of it is unpleasant to their ears. Theft of a product is not as much of a concern when the product is not worth stealing.

Their obsession with piracy might also be leading them to ignore another important reason their sales are down. Even when they do produce something that a lot of people would want to buy, they are lousy at marketing it. You won’t be buying something you don’t know about, and the music moguls just aren’t very good at getting their best stuff to the public ear. Consequently, most people’s music purchases will consist only of recording artists they already know. Anyone can go to Amazon or iTunes and search for music of a particular artist. But those searches won’t introduce you to a new artist or an old artist that has recorded something different that you might like. Since music is in the hearing and not in seeing of the album cover, you probably won’t catch on to it unless you hear it somewhere and like it. Then you think, “Hey I like that. What’s the name of it?” If the medium in which you heard it doesn’t tell you, which is usually the case, you’ll likely give up at that point. No sale.

The mindset of music executives is revealed also in their attempts to cover up just how bad off things are (see the link below). When you’re in denial of the problem you aren’t fixing it. The answers to the woes of the music industry are improved quality of product and better dissemination of information about great new music. You’d be more likely to buy the complete album if you believed that at least half of the songs were good ones.

If this is interesting you can dig deeper at The Real Death of The Music Industry. Lots of informative charts and interesting analysis.

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