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So How Badly is the Music Industry Doing?

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I derailed this thread by asking whether sharing music helped or hurt the music industry. I decided to do a little research to see what I could come up with.

First off, CD sales are way, way down, and they haven't been offset by on-line purchases.

Revenue is at the lowest point in 40 years, and it doesn't look like any turnaround is at hand.

But revenue going to artists may be much better off.

This chart is taken from a blog at Times (London, not New York), but the link is broken.

From the Times:

[i]The most immediate revelation, of course, is that at some point next year revenues from gigs payable to artists will for the first time overtake revenues accrued by labels from sales of recorded music.

[i]Why live revenues have grown so stridently is beyond the scope of this article, but our data - compiled from a PRS for Music report [PRS = performance royalties] and the BPI [BPI = RIAA]-- make two things clear: one, that the growth in live revenue shows no signs of slowing and two, that live is by far and away the most lucrative section of industry revenue for artists themselves, because they retain such a big percentage of the money from ticket sales.

(It’s often claimed that live revenues are only/mostly benefitting so-called ‘heritage acts’. Unfortunately, the data doesn’t shed any light on this because live revenues are not broken down by type of act, gig size or ticket price.

While hardly definitive, the chart suggests that musicians may not be taking it on the chin in the way we thought. I doubt anyone is sad to see record companies lose revenue, but those who actually create the music we enjoy may be doing OK. Hopefully.
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  1. Jim Smith's Avatar
    I was exploring a business concept and it required me to speak with an attorney in the music biz.

    He told me (I don't know if it is true, but it's interesting that many music execs think it is) that their biggest current source of revenues - by far - are litigation produced.

    I hope he is wrong.
  2. barrows's Avatar
    Jim, that is indeed depressing news (even if it is not entirely accurate, that one even says it...)

    At least we see some good news, that musicians can, and are, making money through performance. This trend makes me feel a little better, as it is my belief that music performance should be the priority for a true musician, as nothing connects people and engages them the way live performance can.
  3. sdolezalek's Avatar
    Depending on how the RIAA chart is calculated, it may actually be misleading. If what this shows is how much of each format the average person purchases, it could still be the case that there are many times more people buying music today than a decade or two ago. On the other hand if this just shows aggregate U.S. music sales divided by U.S. population to derive per capita then the actual per true user data might be even worse. It is in the RIAA's interest to make the case that digital has massively cut into their revenues - therefore I always look more carefully at this type of data.

    I'd love to see the data through the end of 2011. The chart implies that CD's were still outselling iTunes and other digital formats in 2009, which is a bit hard to believe. In addition, digital revenues are all music whereas the other formats always include the cost of the media (which should really be subtracted out to make it an apples-to-apples comparison).
  4. Akapod's Avatar
    The first chart was not prepared by the RIAA, but uses data from the RIAA web's site (I think).

    A original version of was prepared by Bain & Co., and was published in the Wall Street Journal and Business Insider. Business Insider then noted that there were several errors, and prepared the revised chart seen above.

    Here, for the sake of comparison, is recorded music revenue in 2011 dollar (e.g., not per capita).

    Not as bad, but still pretty awful. Basically, things have haven't been so bad since cassettes ruled the land.
  5. new_media's Avatar
    Until recently, the major labels controlled record production and distribution. Advances in technology have completely changed that paradigm, and artists simply aren't dependent on the labels in the way they used to be.

    I don't feel too sad for middlemen who rode the gravy train as long as they could and failed to adapt to the realities of new technology.

    Music is just as good as ever. I'm happy if more of what I spend is going directly to the artists.
  6. Akapod's Avatar
    I got into this on the other post referenced above, but the biggest reason for the decline in revenue is digital singles. This category went from sales of 0 in 2000 to over a billion units in 2000.

    When given the opportunity to buy only the good songs (whatever that may mean) as opposed to a CD stuffed with crap, people will save money and forego the crap.

    Piracy is also an issue, but iTunes and the digital single are the primary culprits.
  7. Akapod's Avatar
  8. realhifi's Avatar
    "When given the opportunity to buy only the good songs (whatever that may mean) as opposed to a CD stuffed with crap, people will save money and forego the crap."

    Reminds me of 45 sales. Really no different except that those lead to sales of albums and now people just put "songs" on their iPods. It's just that it is soooo much easier to buy music than it used to be. What I don't get is, if people are buying so many individual songs then why isn't revenue higher?

    The access to streaming music services is the big stumbling block today for artists.
  9. wgscott's Avatar
    It sounds like if the record industry really wants to stay relevant (and alive), they ought to put more effort into meeting the demands of those who want something the download services aren't providing, i.e., high-res, non-upsampled music.
  10. Akapod's Avatar
    So here are some figures from the 2010 Census.

    Streaming falls under the "Subscription" heading, I think. At $200 million, is not's bad, but digital singles accounted for almost seven times as much revenue.

    In ten years, the recording industry lost roughly $10 billion in sales of physical products, and digital sales only made up a bit less than than $3 billion of that. In other words, in 2000, the industry moved more than $14 billion worth of product, and in 2010 they moved less than $7 billion.

    And in 2000, the industry sold almost one billion CDs, and in 2010, they sold over one billion digital singles. Again, there are several issues at play here (and is piracy is one of them), but the biggest problem facing the industry (IMHO), and the one least talked about, is that most albums are suck. Maybe they have one or two good songs, but there's virtually no interest in the other tracks. And when people can disaggregate the content of the albums -- ordering a la carte, if you will -- they will oddly behave like economic animals and do so.
  11. Akapod's Avatar
    @wgscott. I completely agree. In fact, even if there were no audible differences between hi-res and AAC (!), the industry should, for purely economic reasons, release hi-res versions just so we can buy our music all over again.
  12. wgscott's Avatar
  13. mikemercer's Avatar

    I was working at Atlantic Records for Arif Mardin (producer - fellow music addicts know about this GREAT mans work - f__k I miss his wisdom) when Napster launched. Then, I was still around when Lars Ulrich and Metallica and Chuck D made it a HUGE legal battle.

    I decided to watch the SoundScan numbers of Metallica albums (its the database system for which record sales are tallied within the music business - and its numbers dictate what goes Gold or Platinum, etc.). I watched their sales actually go UP as file-sharing took off.

    NOW - this is JUST ME. and I'm in NO WAY REPRESENTING ANY OPINIONS OF ANY CURRENT EMPLOYEES OF ATLANTIC, OR FORMER EMPLOYEES) but I think people were getting samples of their music (tracks) and, when they really loved it, went out to buy the records.

    I mean, did the cassette tape destroy the industry (how many of us made our favorite mixed tapes for girlfriends off the radio or a CD, or even vinyl to look cool, and sound good of course)????

    Bottom line: They (the majors) dropped the ball when digital downloading and file-sharing exploded. As opposed to innovating within it, and figuring out a way to monetize it - Steve Jobs came in and schwacked em across the grill!!

    Jusy my 2 cents