Music's lost decade....

[usdm]

Music's Lost Decade: Sales Cut In Half

http://money.cnn.com/2010/02/02/news...dex.htm?hpt=T2

NEW YORK (CNNMoney.com) -- If you watched the Grammy Awards Sunday night, it would appear all is well in the recording industry. But at the end of last year, the music business was worth half of what it was ten years ago and the decline doesn't look like it will be slowing anytime soon.

Total revenue from U.S. music sales and licensing plunged to $6.3 billion in 2009, according to Forrester Research. In 1999, that revenue figure topped $14.6 billion.

Although the Recording Industry Association of America will report its official figures in the early spring, the trend has been very clear: RIAA has reported declining revenue in nine of the past 10 years, with album sales falling an average of 8% each year. Last decade was the first ever in which sales were lower going out than coming in.

"There have been a lot of changes over the past 10 years," said Joshua Friedlander, vice president of research at RIAA. "The industry is adapting to consumer's demands of how they listen to music, when and where, and we've had some growing pains in terms of monetizing those changes."

The two recessions during the decade certainly didn't help music sales. It's also a bit unfair to compare the 2000s with the 1990s, since the '90s enjoyed an unnatural sales boost when consumers replaced their cassette tapes and vinyl records en masse with CDs.

But industry insiders and experts argue that the main culprit for the industry's massive decline was the growing popularity of digital music.

"The digital music business has been a war of attrition that nobody seems to be winning," said David Goldberg, the former head of Yahoo music. "The CD is still disappearing, and nothing is replacing it in entirety as a revenue generator."

The disease of free

The battle for paying digital customers may have been lost before it had truly begun. In 1999, Napster, a free online file-sharing service, made its debut. Not only did Napster help change the way most people got music, it also lowered the price point from $14 for a CD to free.

"It's pretty easy to give away something for free," said Russell Frackman, the lead attorney for the music industry in its 1999 case against Napster. "It's not that the music industry thought the technology was bad, it just objected to the use to which it was being put."

Apple's (AAPL, Fortune 500) iTunes is credited with finally getting people to pay for digital music, but it wasn't unveiled until 2003.

In the time between Napster's shuttering and iTunes' debut, many of Napster's 60 million users found other online file sharing techniques to get music for free. Even after iTunes got people buying music tracks for just 99 cents, it wasn't as attractive as free.

"That four-year lag is where the music industry lost the battle," said Sonal Gandhi, music analyst with Forrester Research. "They lost an opportunity to take consumers' new behavior and really monetize it in a way that nipped the free music expectation in the bud."

Now just 44% of U.S. Internet users and 64% of Americans who buy digital music think that that music is worth paying for, according to Forrester. The volume of unauthorized downloads continues to represent about 90% of the market, according to online download tracker BigChampagne Media Measurement.

"People will steal music regardless, so it's not worth trying to fight against something where the fight's already over," said Dan Ingala, founder and lead singer of the band Plushgun.

When Plushgun released its album "Pins and Panzers," it was the most downloaded album on the popular peer-to-peer Web site What.cd with 100,000 illegal downloads.

"That's 100,000 CDs we would have sold," said Ingala. "At the same time, it's helping us create an audience. It's just a matter of adjusting."

Where we're headed

The problem for the music industry may actually be its greatest opportunity. Despite the great decline in sales, the Internet has exposed consumers to more music than ever before. But that accessibility has been difficult to monetize.

The music industry has tried to keep up by licensing ringtones, licensing music on popular Internet radio stations like MySpace Music and Pandora and licensing music videos on YouTube. Digital licensing revenue reached $84 million in 2009, and it is expected to grow substantially in the coming year. (See correction below.)

Licensing fees don't make up for the volume of total lost sales, but Gandhi says the fact that the music industry is finally embracing these new technologies and revenue streams means the industry is finally getting it.

She said the combined effect of interactive multimedia, a growth in digital licensing and services such as Lala, which was bought by Apple in December, will ultimately help give sales a boost.

"The industry is actively doing a lot of things that are putting us back on the right path," said RIAA's Friedlander. "We're switching to an access model from a purchase model."

Forrester forecasts music industry revenues will continue to decline until it reaches about $5.5 billion a year by 2014, as new revenue sources begin to lift sales again.

Correction: An earlier version of the story incorrectly reported the figure for digital licensing revenue as $84 billion when it should have been $84 million.

[DvlsAdvct]

Meh, the recording industry needs to realize they need to embrace this whole thing or else they are going to lose more. If they keep alienating their target demographic then they are going to lose everything.

[DJ Van Draken]

Meh, the recording industry needs to realize they need to embrace this whole thing or else they are going to lose more. If they keep alienating their target demographic then they are going to lose everything.

I can't count the number of times I've bought a CD and been disappointed that I only liked one song on it... and it was the reason I bought the cd. The recording companies do it intentionally to generate more revenue. They release a couple good songs on a cd, then fill the rest of the cd with filler material. They save the other good songs for the next cd, then fill it up with more crap. This, of course, isn't always the case, but it is very frustrating when it happens.

This is the main reason I don't buy cds anymore. The only ones I ever buy are from bands that I know will have good songs on it, or if I just want to collect all their music.

I hate that they blame the whole thing on downloading free music, because a lot of people buy digital music. The industry needs to do a few things:

-Quit selling pre-made cds - this is a poor money sink. Replace them with *Make your own CD* options. It'd have requirements on time limit and/or number of tracks... maybe limited on popularity even... but then you'd end up saving 20% compared to buying the songs individually. This encourages people to buy more at a time, rather than a single popular song here and there. You would be able to download the songs immediately AND/OR receive a hardcopy in the mail for backup. Replace the cds in stores with CD writing machines.. where you can build your own burnt CD-R in the store, where you can bring your own CD-R or purchase one at a slightly increased rate. The manufactured copy would be sent to you in the mail.
- Offer lossless, non-proprietary quality digital media, such as FLAC, for download for every song. Combine this with the *Make your own CD* idea.
- Lower the cost of CDs. There's no way I'm paying $15 for a CD that I can't even preview when I only get a couple songs I want. I can go to Amazon.com and get the same CD for $10, or I can get the MP3 copy of the CD for $5 sometimes... or just download the songs I like for $1 each. I'm disgusted at the idea of paying $15 for a cd that turns out to have 2 good songs on it.

[bitcrush]

This article assumes that the RIAA = The Music Industry.

And perhaps 10 years ago, that was mostly true. However, with more and more artists taking distribution into their own hands nowadays, it simply isnt. This article seems to be about how the RIAA is making less money, not the music industry as a whole (see: misleading). I'll tell you who IS making more money--the artists who are getting paid directly via releasing themselves or on independantly labels rather than getting paid 2 cents per song on an RIAA owned label...if they ever make it that far.

The music industry has been shifting for the last decade. The control is being taken out of the hands of corporate sponsors and into the hands of the artists. It's a fantastic sight to see.

[sj03w4t]

CD releases are simply too slow to keep up with internet downloads

[Abyrne7]

I don't understand all this crap with CD's. Why don't labels start selling like "digital sticks" of music that you can personalize with whatever songs you like and put add on's which you can burn to CD'S with DVD footage of your favorite artist.

Or atleast create a mainstream search engine not so bland like I-tunes and more like beatport with charts and many genres with maby videos and top 40 charts and what not with lots of cool features. And then advertise the shit out of it.

CD's are to limited and the digital relm is endless.

[space monkey]

This article assumes that the RIAA = The Music Industry.

And perhaps 10 years ago, that was mostly true. However, with more and more artists taking distribution into their own hands nowadays, it simply isnt. This article seems to be about how the RIAA is making less money, not the music industry as a whole (see: misleading). I'll tell you who IS making more money--the artists who are getting paid directly via releasing themselves or on independantly labels rather than getting paid 2 cents per song on an RIAA owned label...if they ever make it that far.

The music industry has been shifting for the last decade. The control is being taken out of the hands of corporate sponsors and into the hands of the artists. It's a fantastic sight to see.

This. The four biggest companies who influence the RIAA have an estimated 15.5 billion earnings in 2008 and this doesn't include the 1600+ associated members' earnings. I really don't know how the shell game of income play at the RIAA and it's obviously not intended (nor was it ever) a pure for profit company....it's an association who's business model has changed on occasion since the early 50s.

[sj03w4t]

Also scary the way digital download sites charge extra for .wav files.
There are literally thousands of gigabytes of data storage available very cheap, so I think 1€ extra for wav is a little too much!

[hurundi]

illegal downloads are bad for the music industry bud i'd say a huge part of the losses are self-inflicted. they did some really unclever moves (copy protection on cds) and spent more time crying about illegal downloads instead of seeing a chance in new technologies and improving/adapting their sales methods.

i exactly remember the last cd i bought. it was on a day i went on vacation and the first thing i did when i arrived was putting the cd in my discman but i was unable to play it. i tried it with my notebook but due to copy protection i wasnt' able to play it there too. on this day i swore myself to never buy a cd again and thats what i did. my way of supporting the acts i like was going to their concerts if possible but the days of buying cds were definately over.

i would like to write much more about this topic but it takes too much time cause of my bad english

just some other thoughts i had:
- look at the big players in the music business which are damm rich. do they really deserve this money, are they that good? perhaps the musicbusiness is just another bubble in the capitalistic system which had to burst at some point (reffering to van drakens point of feeding us albums with one good song and 15 crappy ones). same thing with the endless amount of crappy casting bands with the only purpose of milkin some cash from stupid buyers.
- isn't it normal that a business dies if they don't adapt to a changing environment?
- why should i pay for a 256kbs mp3 in the itunes musicstore if i can downlad the 320kbs mp3 for free?
- you are a musician because you love making music and not because you want to get rich. don't complain as long as you have gigs.
...

[Remote]

Also scary the way digital download sites charge extra for .wav files.
There are literally thousands of gigabytes of data storage available very cheap, so I think 1€ extra for wav is a little too much!

Ah but it adds up. Storage + bandwidth + lower sale volume = higher price.

And I agree with everyone here saying the RIAA are just being deceptive, the music industry will never die it just won't be what they want it to be anymore.