The WSJ had a front page story on the ongoing decrease in CD sales (Its now on the free site). I’ve been meaning to get to this, but given the more pressing FOMC events and market action took precedence.
Here are the relevant data points:
• Compact-disc sales dropped 20% from a year earlier over the first three months of this year.
• CDs account
for more than 85% of music sold.
• Major retailers have closed about 800 music stores.
• Apple has sold ~100 million iPods.
• 2007 has seen the
two lowest-selling No. 1 albums since data began being kept (by Nielsen SoundScan) in 1991.
• "American Idol" runner-up Chris Daughtry’s
rock band sold just 65,000 copies of its chart-topping album; another
week, the "Dreamgirls" movie soundtrack sold a mere 60,000. In the past, No. 1 records could sell 500,000 or 600,000 copies a week.
• Digital sales of individual songs this year have risen 54% from a year
earlier to 173.4 million — not enough to offset the 20% decline from a year ago in CD
sales to 81.5 million units.
• Sales of all music — digital and
physical — are down 10% this year.
• According to BigChampagne, one billion songs a month are traded on illegal file-sharing networks.
• Mega-Retailers like Wal-Mart Stores and Best Buy represent about 65% of the retail market — up from
20% a decade ago.
The one line in the article that needed debunking was this:
"The music industry has found itself almost powerless
in the face of this shift."
That turns out to be not exactly right — they were not powerless. Rather, the present situation is the result almost entirely of their own making. If they are powerless, it is through their own horrific judgment. In fact, the industry has made some simply god-awful business decisions over the past 20 years, and they are now reaping what they have sown (details to follow).
Next week, I’ll go over some of the decisions, judgments, strategies of the industry, including making of their major mistakes, and what it might mean to the future of the recording industry.
Sales of Music, Long in Decline, Plunge Sharply
Rise in Downloading Fails to Boost Industry; A Retailing Shakeout
WSJ, ETHAN SMITH
March 21, 2007