Posts filed under “Music”

Album Sales Show 9.2% Increase In Quarter as Rebound Continues

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Here’s yet another example of a story getting almost zero play (Thank goodness for the WSJ):

Back in December 2003, we noted that CD sales were rising as the economy strengthened. That healthy trend continued, as we mentioned in February. For the quarter, we saw album sales gain another +9.2%, year over year, Q1 2004:

“A rebound in music sales that began in September appears to be continuing, according to data to be released today by Nielsen SoundScan.

Album sales for the first quarter rose 9.2% from a year earlier, with strong gains in sales of both current and older albums. Total sales for the quarter reached 158 million copies, up from 144.7 million for the first quarter of 2003.

The music industry has been battling a sales decline that began in 2000, and has been trying a variety of strategies to turn it around. Among them are continuing lawsuits against alleged online pirates, enforcement actions against pirates of physical CDs and efforts to lower consumer prices.

Of course, regardless of the positive data, the industry refuses to acknowledge what is happening with sales or why. If they did, they would lose their legislative leverage in DC:

“Despite the favorable results, the music industry is far from out of the woods. “At least through September, the industry will have an easy time beating last year’s numbers,” said Geoff Mayfield, Billboard magazine’s director of charts and senior analyst. “We had weak numbers throughout the first eight months of last year.”

The industry continues to cut back. Yesterday, EMI Group PLC announced it was cutting 1,500 jobs, or 20% of its work force, and dropping weak acts from its roster. Warner Music Group also is in the midst of deep personnel cuts.

One particularly noteworthy performance this week came from R&B singer Usher, whose “Confessions” became the second album in as many months to sell more than one million copies its first week in stores. Norah Jones’s “Feels Like Home” in February also sold more than a million copies its first week in stores; that debut marked the first time in two years that an album had done so.

Strong new titles like these have been a factor in the sales bounce, but they aren’t the entire story. Sales of older titles, known in the industry as catalog, also surged 8% from a year earlier, according to SoundScan. Music companies and retailers are said to have experimented with lower pricing on new and catalog titles, though the music companies generally don’t share wholesale pricing information.”

Pathetic.

Source:
Album Sales Show 9.2% Increase In Quarter as Rebound Continues
By ETHAN SMITH
WALL STREET JOURNAL, April 1, 2004

http://online.wsj.com/article/0,,SB108071645185870088,00.html

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CD Sales Rise as Economy Recovers

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
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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.

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