The decline of hit albums, in context

Stats junkies: here's more data on the end of the hit-driven music economy.

A few weeks ago I posted this chart on the number of Gold (over 500,000 sold), Platinum (1-2 million), Multi-Platinum (2-10 million) and Diamond (10 million and up) albums since 1958:

Many of you asked to see these numbers as a proportion of total music sales, to eliminate the distorting effect of the overall growth of the music industry over that period. I finally got good sales data for the pre-Soundscan (1993) period, so here you go, with a nice polynomial curve fit to highlight the trends [UPDATE: I've clarified the Y axis units; it's hits/total $s]:

Here's the underlying data, in spreadsheet form. The RIAA database this is drawn from is fascinating, and if I had more time I'd be running more queries on trends in genre, sales velocity, and the changing breakdowns between gold, platinum and multiplatinum. But I don't, so I'll leave that as an exercise, as they say. If you do it and find something interesting, ping me and I'll link to it.

Comments

[USCitizen]

Never mind the "...numbers as a proportion of total music sales, to eliminate the distorting effect of the overall growth of the music industry...".
The explanation can be found in one word:
"Rap"

[kenjimori]

Interesting to see how that curve will eventually evolve, say, in ten years.

[j-lon]

What does the total sales curve look like over the same period?

Also, I would caution again about the accuracy of pre-soundscan figures. I'm still not convinced the pre-1993 data can be compared that usefully to what has happened since.

[Richard]

I reported on an interesting study which was done last year in Australia by Alex Malik. Malik found that the Australian music industry had released less albums and singles in recent years, which could help the decline in total sales.

"Malik is conducting research at the University of Technology, Sydney, toward his PHD, and being a former ARIA in house lawyer, happens to know the market well. His research, which uses ARIA’s own data, points out that the major labels have released 39% less albums and 42% less singles for the year when compared to 2003. No wonder sales have decreased."

When it comes to music, less choice should logically lead to less sales.

[Julian Bond]

Slightly off topic. Lessig has some figures for books. 18,000,000 books, 16% Public Domain, 9% in Copyright and In Print, 75% in Copyright but Out Of Print. I wonder what the equivalent is for Audio and Music. I have this sense that the figures are less (or more) skewed. PD is probably less and the split between published and unpublished is probably more even. But I suspect there's still a vast library of back catalogue music that was released once but that you can no longer buy.

I'd love to see a Gutenberg style project to digitise and make available every bit of audio ever recorded.

[csven]

I couldn't help but notice where the timeline begins because while doing some research on handles (yes, handles) in relation to ergonomics, design and manufacturing, the post-WWII period was extremely significant. This curve appears at first glance to follow a similar relationship.

Thanks for the hard data.

[Chris Anderson]

J-Lon,

That data on the overall sales curve is in the underlying spreadsheet, linked above.

Chris

[Kevin Kelly]

Chris,

What are the units in the vertical scale? For instance at its peak there are 10 hit copies sold per what? One non-hit? If sales have lowered to 6 hits sold per 1 non-hit, wouldn't that suggest the industry is still hit driven? But maybe I am reading your axis wrong.

[chris anderson]

Kevin,

The units on the Y axis of the lower charts are the number of hit albums in each year divided by the total industry sales (expressed in $100m's) in that year. I chose $100m as the unit for sales because it gave us a starting ratio of 1 in 1957, which makes annual comparisons easier.

All the details are in the spreadsheet linked above.

[J-Lon]

It would also be interesting to see the data broken out separately by gold, platinum and diamond designations.

For example in the early 1970s, at the peak of the baby boom, you get the longest stretch of having the ratio hovering around 10. But if most of these so called "hits" are gold records with sales between 500k and a million, that's a bit different than a situation where perhaps the ratio of the total number of hits to sales is lower, but there are more releases in absolute terms that have sold platinum.

In most cases, one multi-platinum release is going to be worth more from a profit standpoint than multiple gold releases, because the nature of making and selling records is such that the profit margin tends to go up with every release that's sold past the break even point (i.e., once you've pushed the rock up the hill at great effort and expense, and it starts rolling down the hill, the farther the rock rolls on its own steam, the more profit there will be, because more and more of the costs have already been recouped).

Obviously, the profitability of any record release is all about the scale. If you spent $5000 recording and manufacturing a record and it sold 10,000 copies, that would be a very profitable and successful disc.

Conversely, if you spent $250,000 and sold 75,000, this is a business failure that has not even broken even.

I'll also reiterate again that a lot of the sales data from the pre-soundscan era is even more suspect than the soundscan data. And designations like Gold, Platinum, etc. were even more suspect, because they were based on records shipped and not records sold. As such, these designations were often used as marketing tools to try and help get the rock pushed up the hill (i.e., to convince the public that a record was a hot hit, and perhaps even more important, to convince reluctant retailers that they should stock this "hot" gold record in their limited shelf space).

Since retailers in the music business typically can return product for full credit, it was not uncommon in the pre-soundscan era for records to ship gold or platinum and then generate actual sales far below that (or in some cases, ship gold and return platinum).

As far as I know, once a disc was designated gold or platinum, I don't think the RIAA later went back and took that designation away if 575,000 of those platinum "sales" ended being returned to the label, soon to be budget-priced in the cut-out bins.

[Michiel]

Fascinating stuff. RIAA and MPAA execs should be forced to read this blog, instead of learning about the eeeevils of piracy from equally clueless consultants.

[Mike Dodaro]

The idea that quality niche markets can exist or even thrive in a wired economy has fascinated me for many years. It was, in fact, instrumental in my career transition from the "subculture of classical music" to a job that pays a living wage. Now there is a name for the idea that things of great value can sustain themselves in the "long tail". Theoretically, the long tail sustains niches of quality products because entrepreneurs can profitably sell them. This does not necessarily solve the problem of the producer of niche products or art or whatever. If the market sustains the products because the entrepreneur can manage them profitably, that is, the horizontal axis is products, then the producer may, in fact, be a succession of short-lived wage slaves in China, or musicians living in ratty inner-city apartments. If, on the other hand, the horizontal axis is time (mainstream hits tend to be five-minutes-of-fame phenomena), or extent of the market in a geographical sense, or digital scope, maybe there is a way to read the long tail as profitable sales for the producer.

[Tony Burns]

Why are you comparing total sales in dollars, not number of records, to number of hit records. I think if instead you compared total number of records the trend would likely be even more dramatic

[Benjamin Joffe]

Chris,

This data is very interesting and compares very well with what we witnessed in Japan and South Korea when researching for our report on "Mobile Music Best Practices".

Basically, the "hit" economy is fading away. As you point out, this is true in music, in movies, but is becoming true as well in radio (everybody's a broadcaster - throught podcasts or else), press (see Korea's 41,000 citizen-journalists-strong Ohmynews site).

It all comes down to production and distribution costs: digitalization of media and widespread of productions tools have made this terribly cheap. And traditional marketing is losing its effciency as shown by movies' viewership after release. So now, where is the value?
My opinion is that the value is now concentrated in two elements: "timely entertainment" and "pure talent".

And this will reshape dramatically both the media and entertainment industry, from the headcount to the average actor's or singer salary.

Cheers from Beijing,
Benjamin Joffe
www.plus8star.com

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[alex Papanastassiou]

In its weekly publication Epok dated 20-26 January 2006, French retailer of cultural goods (music, books, concert tickets, DVD…) made public the figures of cost to bring to market a CD of Thomas Fersen. That was to justify the price of a CD... Very interesting figures.

On a total investment of slightly over 554000 €, traditional marketing initiatives (TV advertising, billboard, print ads, other marketing communications) claim about 220000 €. The production of physical media (CD, DVD…) required in the traditional industry to distribute content cost about 150000€. None of these cash outflows is necessary in a long-tail model for the music industry.

In this case, the investment required to have that artist's new songs distributed digitally by using a long-tail model would have been lower by over 350000€. That saves about 60% of the investment, which gives ample marging to imrpove the deal for the artist and to bring music to market at a lower cost such that illegal copies would be insufficiently attractive (to be confirmed). Of course, there is one slight little problem: if we went for the long-tail model, that would leave quite a few intermediaries out of the loop... Tough life.

[Josh McHugh]

Chris - a little off topic, but thought it worth mentioning: a post on iVillage, backed up by some decent statistical analysis, about what might be called
The Decline of Hit Names.

Fluffy? Perhaps, but to me, in the throes of the baby name selection process, it suggests a fundamental longtailing trend in the self-identification department.

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[qkslvrwolf]

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You seem to have got the niche from the root, Awesome work

[spielen]

"Back doors" to site content are always under-addressed. Many sites spend too much time focusing on the homepage when many users never see it due to links from Google that go to interior pages. This post also brings up an interesting point similar to anthologies & box set albums. I have picked up books by Seth Godin (Small is the New Big) & Guy Kawasaki (Reality Check) that are essentially "Greatest Hits" compilations of blog posts in published book form. There is something to be said for a tangible resource in the age of information overload.

[xmas presents]

According to the study, digital downloads will fill the void -- but not entirely. The Jupiter survey predicts that overall, the music market will shrink by about 0.8% by 2013, to $9.8 billion in sales, with the percentage of sales of "offline physical format" forms (CDs, albums, etc.) plummeting from a 64% share of sales down to 40%. That's a combined annual growth rate (CAGR) of -8.7% -- a worse number than Jupiter predicted last time they looked at the market (-7.1%).