Finally, the Real Reason CD Sales Are Falling

For years, the representatives of the recording companies have issued predictions of doom and gloom for their own industry.  Since suing Napster in 1999 they have fretted over copyright infringement and piracy.  According to the RIAA, file sharing costs the industry $4.2 billion per year. But now CD music sales are down 20% from 2006.  Has file sharing finally destroyed the music industry?  I doubt it.  Even if those lawsuits were having the chilling effect they are intended to spread, shutting down every P2P network on the planet, CD sales would be suffering. Why? It's tempting to say there's no good new music, and that the record companies have brought this on themselves by promoting the Brtiney Spears' of the world.  But I'm sure there's good music out there somewhere, and this sounds more like a subjective criticism than a real hypothesis. What if albums are not just competing for your dollar against other albums?  Most people only spend so much money on entertainment or media, and CDs now have to compete against DVDs and video games.  Most people only spend so many hours a day consuming media, and music has to compete with TV, the Internet, and cheap cell phone minutes. I'm not the first person to think of this, I've seen this brought up on blogs and in forums like Slashdot.  But it has always struck me how little coverage this idea gets in the mainstream press, even the business press.  Finally Aaron Pressman from Business Week has put some hard numbers to the notion that CDs are losing out to other media. His source?  A report from the MPAA, hardly a den of piracy-loving communists.  Time spent on entertainment rose 4% between 2001 and 2005, which doesn't even match S&P 500 growth rate.  People spent less time per week listening to music and more time with TV and the Internet. This tracks pretty closely with my experience (and I realize that this is just anecdotal).  In the early and mid 1990s, I spent a good percentage of my entertainment money on CDs.  As videos started to fall in price around 1995 or so, I bought a few here or there.  Then DVDs hit is big around 2000 or 2001.  Soon after that DVDs of television series started appearing and falling to  $20-$40 a season. My CD spending has slowed to a trickle.  I have never been much of a P2P MP3 pirate, and I never even bothered to install Napster.  I am, on the other hand, a big proponent of downloading all the great free MP3s that bands and labels make available.  I also still listen to some of the same music I bought in the 1990s, now ripped to my hard drive. I only have so many hours in a day and although I can listen to CDs while surfing the Internet, I'm not sure I want to put them in my computer anymore, for fear of rootkits. So where does this leave the music industry?  No doubt they will continue to sue 9-year-olds and disabled retirees, and litigating against technological change is not a good business model.  Maybe the open-source-loving interweb hippies are right and bands will promote themselves using MySpace and YouTube and keep a much bigger piece of the profits.  Maybe not. What they are doing right now, though, isn't working.  It's the limits of human consumption and the invisible hand of capitalism they should fear, not some kids with cable modems.

  1. I was just moving my boxes of CDs down to the basement just yesterday. About 500 of them, bought between Pearl Jam’s Ten and the last Ben Folds album. I, like you, spent most of the 90′s “being” music. Then Napster came around and I nabbed maybe 2 albums worth of stuff and was done with it (of course, it was done itself). I ripped all of my CDs to my computer and pretty much didn’t buy anything else. I loaded my iPod Mini once, 2 years ago, and haven’t touched the playlist since (actually, that Ben Folds album didn’t even make it on there).

    In my mind, the reason for not buying any new music is because there’s nothing new I want. Is that the case for everyone? I doubt it – I know at least 3 guys who regularly buy new CDs. Not necessarily “new” but new to them. I’m really just a bitter old fart.

    But, if our time in the 90′s was indicative of how much time and money young people had to devote to music then I agree. Now, you can buy or rent video games, or buy a CD. Buy or rent a movie or buy a CD. Watch “Deal or No Deal” or buy a CD. Lots of cheaper options, less intriguing music and there’s still the lure of legal and illegal single-track downloads.

    Personally, I’ve become a television hoarder in the same way I was a CD hoarder, but that’s another story for another day.

    March 28th, 2007 at 10:10 am
  2. Hmm. I don’t know the exact cause but I can tell you that I personally will buy a cd or buy music from a website (mp3s) vs getting them off of a p2p program. But, more often then not, if I buy a CD that I really like, copies are made for people who would like to hear the artist as well. I can’t say how much of an effect this has on the market but I am sure that with how easy it is to copy a CD, this has to also have an effect on the industry.

    S. H. Skuld
    March 28th, 2007 at 10:12 am

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