Posts filed under “Music”
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.
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 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. 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
Sarah Mcbride and Andy Pasztor,
The Wall Street Journal, March 1, 2004 1:28 a.m. EST
The economy slows, CD sales slow.
The economy recovers, CD sales recover.
If I am going too fast for you with this complex and sophisticated economic argument, please let me know. I can’t make this explanation any simpler, but perhaps I can find some crayons or blocks for you to play with.
The simple truism above is well known to everyone outside of the music industry. For unknown reasons, the music industry and the RIAA act as if they are exempt from the business cycle. Most sectors of the economy suffer during recessions — the exceptions are “interest-rate sensitive” groups, like Autos, Home, and Durable Goods, which benefit from the falling rates which usually accompany economic slow downs.
As we have been discussing for quite sometime now, sales of discretionary entertainment products like CDs are not an exception.
Despite the high, illegally price-fixed costs of a CD, you don’t yet need to take out a mortgage to buy one. So there is simply no reason to believe that CD sales have ever benefited from a broader economic slowdown. Yet judging strictly from the public statements of the recording industry over the past 3 years, one would never have even known that a post tech-bubble recession happened from 2000-2003. They simply never mention it. The New York Times, in an article about the continued uptick in music sales (“CD Sales Rise, but Industry Is Still Wary“), never reaches the issue of the economic weakness during the past three years.
As the economy weakened, so have CD sales:
Annual CD sales
Source: New York Times
Not surprisingly, industry sales are running parallel to the broader economy.
Indeed, in the aftermath of the world’s greatest speculative bubble, during a recession and a bear market which saw the Nasdaq lose 80% of its value, the sector only saw a 12% drop in sales during the same period. Its hard to undestand why music executives are wringing their hands over this; Most businesses would have been thrilled with “only” seeing their business off by 12% during this period.
Since then, we have seen an improving economy. Although consumer confidence remains shaky — mostly due to anemic job growth — we have seen a general improvement in spending. This has been especially true in the second half of 2003, as the hottest part of the Iraq war passed.
As the economy continued to gather strength, sales of CDs recovered. The last quarter of 2003 saw a marked marked uptick in total album sales.