Music Industry: Is digital making up the difference?

On Friday, the RIAA released the official sales figures for 2005. You've seen the press accounts ("Music Sales Post Their Sixth Year of Decline"), but when you look closely at the numbers it doesn't look quite as bleak as that.

I've charted it all out below. A few points to note:

• Although CD sales have fallen off a cliff, digital sales appear to be making up most of the difference. However, there are a few statistical nuances...
• In 2005, the RIAA started tracking ringtone ("mobile") and subscription (Rhapsody, et al) digital sales. In 2004, it started tracking digital download sales (iTunes, et al). Obviously there were sales in all three categories in previous years, but they just don't show up in these numbers. So 2005 looks slightly better than it really is.
• Nevertheless, those distortions aren't huge. In revenue terms the industry did about as well last year as it did before, and it's worth noting that the margins on digital distribution are considerably higher because there are no physical goods to manufacture and ship. So 2005 may have been more profitable than 2004 (it certainly was for Warner Music Group). Who knew?
   

You can read the RIAA's press release explaining its methodology a bit more here.

Comments

[John "Z-Bo" Zabroski]

What about another real moneymaker -- concerts? From various books I have read about the recording industry, this is where the artists actually usually are able to go from McDonald's-sized paychecks to riches.

Also, it might be interesting to know if there is a vacuous effect by super-successful songs/artists. Namely, I know people who when they buy a really good album they like, they don't buy another album for some time.

[Simon Parker]

Not sure if you saw this, but in the UK we had our first No.1 single last week based purely on download sales. This track was ONLY available online - not on CD - but sold more than any CD single.

http://news.bbc.co.uk/1/hi/entertainment/4870150.stm

Could be the way of the future.

[Don]

I still subscribe to the theory that sales will continue to decrease as long as the number of new commercial releases also decreases. So this new data begs the question: how many new relases were there in 2005?

[scottsp64]

I am glad you're back. I've got the book in my wishlist. Excited about geekdad.com

Scott

[Nathan Jones]

You say Warner had a more profitable year. I'm sure this is totally unrelated, but unlike SonyBMG and EMI, I don't recall hearing news about Warner using DRM...

[Stephanie]

If the music industry would do more to embrace the digital age instead of trying to make it harder for people to download they would make millions more in my opinon, I can not wait to free records inc comes out i bet they would be a hit ! Granted no such company exsists.

[ldh]

Hello everybody, I want to make friend with you. Nice to meet you.

[Dave Allen]

Chris,

It's clear that the biggest losers in the music sales meltdown are your average CD retailer, especially the mom & pop stores. They will clearly have to embrace the niche to survive. And does anyone have any take on how the music industry is viewing the legality of Podcasting?

[Dave Allen]

According to the Toronto Star link
the Canadian Music Industry says that it too is in a slump. The writer thinks otherwise, here's an excerpt

"But the real story is the renaissance that's happening in Canadian pop music.

It's hard to quantify the success and influence of the aforementioned bands in any traditional sense, because so many of their fans have illicit copies of their material. On paper, it might appear that Bublé has sold many more albums than, say, the new wave Montreal band Wolf Parade. But if you were to count actual tracks distributed, legally and illegally, you'd see a different picture.

The Canadian Recording Industry Association says the industry's in a slump. That may be true, but music as an art form is being enjoyed more fervently than it has since, well, probably ever."

[Tidmarsh]

Read the RIAA's methodology more carefully. They don't post sales figures. They post _shipment_ figures. What they are saying is that they shipped fewer CDs to retailers, not that retailers sold fewer CDs.

In the past they have reported similar "declines" when Nielsen's Soundscan ratings show an _increase_ in actual CD sales:
http://arstechnica.com/news/posts/1084492882.html

How can this be: more sales and fewer shipments? Easy--a more efficient distribution chain with retailers holding less inventory:
http://www.musicdish.com/mag/?id=9452

Don't take the RIAA's numbers at face value; they've been misleading (to be charitable) in the past.

[Linda]

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[ogłoszenia nieruchomości]

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[spielen]

"90 percent of computer savvy people don't pay for music anymore"

Most of what I try to actually buy is not available for purchase, mostly trance and techno. If they don't wanto sell it, I'll get it from the torrents.

Whenever I hear a song I like on XM 82, I look up the artist and song name. They are never available for purchase at Amazon etc... I even check iTunes on my wife's computer.

If they are, I pay for them. I will never buy another actual CD as long as I live however.

[xmas presents]

The approach of the music industry to the advent of online sharing of digital music may go down in history as one of the most textbook examples of how to punish your customer for their devotion to your product. Rather than recognizing the fact that online file-sharing indicated an incredible amount of devotion to music content on the part of the consumer, the music industry instead chose to punish their most loyal fans with suits. Certainly, file-sharing is illegal, but the stubbornness of the music industry to listen to what the consumer was telling them: that downloading music by the song was what they wanted, caused them to delay entering the digital music market until Apple had all but owned the space, leaving them sharing a significant portion of their profits with Steve Jobs and the folks at Apple HQ.