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DVDs continue to cannibalize CDs

Posted By Barry Ritholtz On December 30, 2004 @ 12:22 pm In Film,Music | Comments Disabled

OK, my last rant for the year about the music industry [1]

Yesterday, we discussed the attempts to wring more dollars out of smaller numbers of music buyers [2]. Today’s rave looks at a new fallacy gaining traction: Decreasing CD sales can be supplemented with increasing music DVD sales.

That gets it exactly backwards; its increasing DVD sales which are c ontributing to decreasing CD sales. Consider this bass ackwards NYT headline: “Music Labels Look to DVD’s as Sales of CD’s Decline [3].”

A more accurate header would have read: “Sales of CD’s Decline as DVD’s Soar.”

We considerd this previously [4] in terms of DVD movies [5]. Lately, we’ve been noticing DVDs as a music format (concerts/videos) is also kicking CD ass. Its not overstating it to say that DVD music sales have been slowly eating away at the entire CD format.

It’s no surprise why: at $15, the CD is a decreasingly attractive value to consumers versus the DVD. One contains 45 minutes of audio; the other 2 plus hours of audio, video, documentaries, interviews and additional content. Which provides a better bang for the increasingly tight consumer dollar?

The music biz marketing wizards need to face facts: CDs are a lousy deal. Indeed, the so-called free DVD given away with a CD purchase is a misnomer; buy the DVD — the more desired product — and it comes with a free CD.

As much as they desperately want to blame P2P, the dysfunctional Labels [6] need realize that nearly all of the “old economy” media have been suffering a sales slow down: Newspaper readership is down big; Televised sports programs have seen their audiences slide; Film attendance is soft (revenues are up due to increasing ticket prices); Magazine sales have been lackluster; The Book Industry Study Group [7] reported that sales dropped by 23 million units from 2002 to 2003.

Increased competition from many digital formats — internet, TiVo, DVD, video games, and digital music — are competing for scarce consumer time and money. Indeed, today’s NYT reported that a recent survey found that "use of the Internet has displaced television watching and a range of other activities. Internet users watch television for one hour and 42 minutes a day, compared with the national average of two hours."  Time is hydraulic, the study’s author noted. "Time spent on the Internet is time taken away from other activities."

Why is it that only the music industry gets to blame the P2P boogie man for its woes?


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Source:
Music Labels Look to DVD’s as Sales of CD’s Decline [3]
Robert Levine
NYT, December 27, 2004
http://www.nytimes.com/2004/12/27/business/media/27dvd.html

Is Hollywood to blame for the music industry’s woes? [5]
Meredith Amdur
Variety, March 31, 2004
http://www.corante.com/copyfight/archives/002787.html

Internet Use Said to Cut Into TV Viewing and Socializing [8]
John Markoff
NYT December 30, 2004
http://www.nytimes.com/2004/12/30/technology/30internet.html


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

URL to article: http://www.ritholtz.com/blog/2004/12/dvds-continue-to-cannibalize-cds/

URLs in this post:

[1] music industry: http://bigpicture.typepad.com/comments/music/index.html

[2] smaller numbers of music buyers: http://bigpicture.typepad.com/comments/2004/12/music_industry_.html

[3] Music Labels Look to DVD’s as Sales of CD’s Decline: http://www.nytimes.com/2004/12/27/business/media/27dvd.html?ex=1261890000&en=97d674acf0964b58&ei=5090&partner=rssuserland

[4] previously: http://bigpicture.typepad.com/comments/2004/03/cd_no_dvd.html

[5] DVD movies: http://www.corante.com/copyfight/archives/002787.html

[6] dysfunctional Labels: http://bigpicture.typepad.com/comments/2004/04/music_industry_.html

[7] Book Industry Study Group: http://pittsburghlive.com/x/tribune review/entertainment/books/s_287987.html

[8] Internet Use Said to Cut Into TV Viewing and Socializing: http://www.nytimes.com/2004/12/30/technology/30internet.html

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