Odds are you didn’t read a newspaper this morning. In fact, newspaper readership is down roughly 20% this year alone. Daily circulation of American newspapers peaked in 1984 and dropped 13% to 55.2 million copies by 2003, according to the Newspaper Association of America. At the same time, advertising revenue (with adjustments for inflation) hasn’t budged either. [i]
In essence, newspapers are proving to be antiquated delivery systems that provide information in the least rapidly digestible way to a culture thriving on instant, unobstructed delivery of information. It’s also a disturbing parallel for the music industry.
Perhaps you’ve heard that the music industry is having some problems. Traveling to your local record store to pick up that new LP isn’t really where it’s at for today’s music consumer. In fact, it could be argued that fewer and fewer people are bothering to purchase music at all. Now, music is available the second it’s leaked and uploaded to one of a bunch of peer-to-peer sites across the net and around the virtual world.
But the music industry is still behaving like the newspaper folks. Their preferred delivery system (the compact disc) is thriving compared to digital counterparts, and while revenues decline, digital hasn’t monetized itself either. Here’s a nifty graphic to chew on. It shows the peak year for sales of each musical format from LP to mp3 and (nostalgically) including things like eight-tracks. [ii]
While compact disc sales peaked in 1999 with revenues of $15.4 billion, they’re still doing fairly solid business. Admittedly, not the amount of business we all hope for, but business nonetheless. In 2008, the peak year (thus far) for digital downloads, albums and singles combined brought in revenues of about $1.6 billion. Compact disc sales are still trouncing their digital competition. While they’re still in decline, they’re also still a solid profit line for a dying industry.
Here’s another fascinating statistic: illegal downloaders buy more music.[iii] What’s that? Oh no! Say it ain’t so! This can’t possibly be true, can it? A recent poll by the Independent (one of the UK’s leading newspapers) showed that out of 1,000 polled, 10% admitted to illegally downloading music. Of that 10% the average they spent on music (purchased legally) is roughly £77 ($113).[iv] Non-downloaders spent roughly £33 ($49). Simultaneously though, the RIAA and BPI (British Phonographic Industry) continue to insist that illegal downloading is destroying the music industry.
The music industry can’t change their course to accept illegal downloading. It would be entirely hypocritical, and the resulting bad press would be a nightmare. Instead, it seems, that as they look over their balance sheets, they would rather raise prices elsewhere and keep people buying their (margin friendly) compact discs. They’ve also raised the prices on things like concert tickets and merch.
A personal, yet applicable, anecdote: I’m a huge Elton John fan. In fact, my first rock concert was Elton at the Worcester Centrum in October of 1988. The cost of the ticket was $22.50. It was a great show. But again, I’m partial. But, that price: $22.50 in 1988. Wow. This past July, I saw Elton again. This time he was on tour with Billy Joel and played at Gillette Stadium in Foxboro. The ticket was a jaw-dropping $202.74 (fees included). The 2009 ticket was nine times more expensive than the 1988 counterpart, and the venue was nearly three times the size! In case you’re curious, the concert was amazing. For that price, it better be. At the same time though, lots of acts are having a hard time getting folks to the shows. [v] Ticketmaster recently reported “ticketing revenues for the second quarter were $311.9 million, down 18% versus the prior-year quarter.”[vi] Quite honestly, is anyone surprised? And really, if you’re still able to make $311.9 million in a single quarter, do you expect anyone to feel pity for you? Maybe it’s time to rethink the model.
The music industry is still making money — but not as much as they would like. Music and touring sales are seemingly strong, but not as much as they were. The numbers show that there’s plenty of money to be made — even with illegal downloading and stalling sales. As consumers, in a national recession, we’re expected to tighten our belts. The music industry needs to do the same.
Either that, or they need to learn how to budget better on $311.9 million per quarter.
[i] http://online.wsj.com/public/article/SB111499919608621875-72vA7sUkzSQ76dPiTXytqgOMS5A_20050601.html
[ii] http://gizmodo.com/5329972/beautiful-waveform-timeline-shows-music-sales-in-all-media-through-time
[iii] http://www.independent.co.uk/news/uk/crime/illegal-downloaders-spend-the-most-on-music-says-poll-1812776.html ,
[iv] http://www.ipsosmori.com/newsevents/latestnews/newsitemdetail.aspx?oItemId=13
[v] http://www.thestreet.com/story/10573855/earnings-preview-ticketmaster-2q-earnings-due.html
[vi] Ticketmaster Q2 2009 Earnings statement via shareholder.com
