- The Big Picture - http://www.ritholtz.com/blog -

Radio Consolidation and CD Sales

Posted By Barry Ritholtz On February 28, 2004 @ 1:46 pm In Music | Comments Disabled

Yet another [1] comment [2] in our continuing [3] series [4] as to the real [5] reason [6] CD [7] sales [8] have been slowing [9]:

I harp on Radio consolidation for a reason. The table below explains why: Consolidation is part of the music industry’s woes. Its yet another reason accounting for the slowing CD sales.

According to Edison Media Research, the most influential media impacting music consumers is radio. Amongst consumers who have purchased a CD in the past 12 months, a whopping 75% said their purchase was influenced by what they heard on the radio. Friends and family? A distant second, at 46%. Music television is third — at least it was, back when MTV was actually playing music.

influencing_consumer_music_purchases.bmp [10]
Source: emarketer [10]

Consider this part 2 of basic lesson in simple math and economics. Radio is the dominant source impacting consumer purchases. They purchase what they hear broadcast. Due to consolidation, today Radio plays a fewer variety of artists, and airs less songs. Consumers hear less music.

You don’t need a spreadsheet to figure out what happens next: Consumers buy less music. This phenomena is independent of any economic weakness [9] we have previously discussed.

If the RIAA were smart — and if you suspect by now I think they are not, congratulations, you’ve been paying attention — they would hire a lobbyist to petition against pretty much everything Clear Channel Radio ever requests of Congress.

Perhaps the music industry may find some small salvation in Satellite Radio [11]. This relatively young industry looks to be beyond the reach of both payola and the moralists at the F.C.C.

Of course, the century is still young, and there’s plenty of time for either Satellite Radio, the F.C.C., or even the music industry to screw things up . . .

UPDATE March 2, 2004, 1:56 PM
Following our mention last week of Satellite Radio as some small potential salvation for the industry, comes this article from Monday’s WSJ:

“Sirius has always touted its “pure music” philosophy and commercial-free format as an important advantage in the battle for satellite-radio dominance. XM suddenly did a U-turn last month, announcing it would make its music channels commercial-free, too. Starting this week, Sirius and XM each plan to launch local weather and traffic reports for a handful of major metropolitan areas, including New York and Los Angeles.”

Amid the FCC’s Decency Push, Satellite Radio Is Poised to Grow [12]
Sarah Mcbride and Andy Pasztor,
The Wall Street Journal, March 1, 2004 1:28 a.m. EST

Good stuff.

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/02/radio-consolidation-and-cd-sales/

URLs in this post:

[1] another: http://bigpicture.typepad.com/comments/2004/01/music_retailers.html

[2] comment: http://bigpicture.typepad.com/comments/2004/01/competing_on_ot.html

[3] our continuing: http://bigpicture.typepad.com/comments/2003/09/the_napster_coo.html

[4] series: http://bigpicture.typepad.com/comments/2004/01/musicians_looki.html

[5] real: http://bigpicture.typepad.com/comments/2004/01/best_buy_keeps_.html

[6] reason: http://bigpicture.typepad.com/comments/2004/02/americans_think.html

[7] CD: http://bigpicture.typepad.com/comments/2004/02/time_not_on_the.html

[8] sales: http://bigpicture.typepad.com/comments/2004/02/uk_albums_have_.html

[9] slowing: http://bigpicture.typepad.com/comments/2004/02/cd_sales_rise_b.html

[10] Image: http://www.emarketer.com

[11] Satellite Radio: http://www.buzzmachine.com/archives/2004_02_25.html#006366

[12] Amid the FCC’s Decency Push, Satellite Radio Is Poised to Grow: http://online.wsj.com/article/0,,SB107809808894842347,00.html

Copyright © 2008 The Big Picture. All rights reserved.