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By George Ziemann The RIAA (Recording Industry Association of America) has a real funny way of looking at things. Not funny - "ha ha", Funny - "odd." Before you read the rest of this story, I heartily encourage the reader to click on the RIAA link above. Make your own judgement before you hear a thing I have to say. Take your time. Be sure to look at their Market Data because I'm going to be quoting it. The sky is falling! The music industry is doomed! Woe is everyone. The pirates have stolen all the gold. What will we ever do? How can we possibly recover? You've poured water on us and we're melting! Let's quote a few of the RIAA's statements. The first quote comes from the report on 2001 year-end shipments. The title -- "Recent study Illustrates Internet Piracy's Impact on Music Market"
Time out. Total number of units fell 10.3 percent. Total sales dropped 4.1 percent. Sorry, Hilary, there is a simple explanation -- The economy sucks, you guys raised prices anyway while promising to copy-protect everything and make it harder to listen to. The consumer took a step back. And here is another contributing factor, from their article, "The Value of a CD".
While this is true, all of those costs will be fully recovered from the record company out of the big 8 cents per song the artist gets paid But that's another argument for another day. Here's the interesting part.
I was very happy to see them provide this information, because after compiling the RIAA's market data, I had noticed that the "new releases" data which had been present in all of the information from 1992 to 1999 had somehow been overlooked when the RIAA put together the 2000 and 2001 summaries.
So the record industry cut their inventory (and artist investment) by 25 percent and sales only dropped 4.1 percent, even though the economy is at rock bottom. There were almost 12,000 fewer new releases for the consumer to choose from in 2001 than 1999. The record companies are making more money per release than ever.
Up until two years ago, modems were too slow to download music. Duh. Did anyone ask these consumers if they were downloading major releases or freely uploaded Independent music? If it was the latter, that's exactly what we want the consumer to do. If piracy is the problem, why is it that sales didn't start declining until AFTER the RIAA had Napster shut down? Let's see how the "sales displacement" theory holds up under scrutiny, using the RIAA's own statistics. All of these figures came from the RIAA's web pages, with the exception of Average Unit Price, which was calculated based on figures given. Some of the 2001 data was not included on the site either and had to be extrapolated from what information was provided. |
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| Year End Statistics -- Net after returns -- All data in millions except Avg. Unit Price | ||||||||||||
| 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | |
| CD Units | 286.5 | 333.3 | 407.5 | 495.4 | 662.1 | 722.9 | 778.9 | 753.1 | 847 | 938.9 | 942.5 | 906.6 |
| CD Dollars | 3451.6 | 4337.7 | 5326.5 | 6511.4 | 8464.5 | 9377.4 | 9934.7 | 9915.1 | 11416 | 12816.3 | 13214.5 | 12900 |
| Avg Unit Price | 12.05 | 13.01 | 13.07 | 13.14 | 12.78 | 12.97 | 12.75 | 13.17 | 13.48 | 13.65 | 14.02 | 14.23 |
| Cassette Units | 442.2 | 360.1 | 366.4 | 339.5 | 345.4 | 272.6 | 225.3 | 172.6 | 158.5 | 123.6 | 76 | 45.6 |
| Cassette Dollars | 3472.4 | 3019.6 | 3116.3 | 2915.8 | 2976.4 | 2303.6 | 1905.3 | 1522.7 | 1419.9 | 1061.6 | 626 | 363 |
| Avg Unit Price | 7.85 | 8.39 | 8.51 | 8.59 | 8.62 | 8.45 | 8.46 | 8.82 | 8.96 | 8.59 | 8.24 | 7.96 |
| Vinyl LP/EP Units | 11.7 | 4.8 | 2.3 | 1.2 | 1.9 | 2.2 | 2.9 | 2.7 | 3.4 | 2.9 | 2.2 | 2.3 |
| Vinyl LP/EP Dollars | 86.5 | 29.4 | 13.5 | 10.6 | 17.8 | 25.1 | 36.8 | 33.3 | 34 | 31.8 | 27.7 | 27.4 |
| Avg Unit Price | 7.39 | 6.125 | 5.869 | 8.83 | 9.368 | 11.4090 | 12.689 | 12.333 | 10 | 10.965 | 12.590 | 11.913 |
| Music Video Units | 9.2 | 6.1 | 7.6 | 11 | 11.2 | 12.6 | 16.9 | 18.6 | 27.2 | 19.8 | 18.2 | 18.2 |
| Music Video Dollars | 172.3 | 118.1 | 157.4 | 213.3 | 231.1 | 220.3 | 236.1 | 323.9 | 508 | 376.7 | 281.9 | 281.9 |
| Avg Unit Price | 18.728 | 19.36 | 20.71 | 19.39 | 20.63392 | 17.4841 | 13.970 | 17.4139 | 18.6764 | 19.025 | 15.489 | 15.489 |
| DVD Units | 0.5 | 2.5 | 3.3 | 7.9 | ||||||||
| DVD Dollars | 12.2 | 66.3 | 80.3 | 190 | ||||||||
| Avg Unit Price | 24.4 | 26.52 | 24.33 | 24.05 | ||||||||
| Total Dollars | 7182.8 | 7504.8 | 8613.7 | 9651.1 | 11689.8 | 11926.4 | 12112.9 | 11795 | 13402.3 | 14312.92 | 14174.43 | 13596.35 |
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Okay, sales are down 6 percent over the past two years. Considering the economy, that doesn't seem like such a serious problem. I'd also say that pushing the average price (these figures are net after returns) over $14 a unit probably didn't help any, either. If the record industry had gone forward with the 12,000 releases that it cut back over the past two years and only sold 3,000 copies of each title (a loser in record company terms), both the units shipped and total sales would have continued to climb as they had in previous years. Here are Hilary Rosen's concluding remarks on the state of affairs at the end of 2001.
The source of the $4 billion figure is attributed to "IFPI, the international association representing the recording industry worldwide." Good thing she passed that one off on someone else. I just don't see where the justification for that figure could possibly come from. The numbers are simply not there. In short, this is total bullshit. But wait. Something is missing from the 2001 statistics, at least the ones I could find. Singles. For some reason they stopped reporting this information. The reason is obvious. The single is dead. This is what the record companies are screaming "pirate" about. This is the product that the Internet has killed. And yet, this comes nowhere near the fictitious $4 billion in "lost sales" mentioned above. Disproving the theory that "You'll never go broke underestimating the taste of the American public" (H.L. Mencken -- thanks to the slashdot crowd for pointing out my error), U.S. buyers have apparently come to the realization that $3.50 to $5.50 is too damn much to pay for one song.
You'll note that, even with the 1992, 1996 or 1997 figures, it would take 10 years for this to add up to the $4 billion in "piracy losses" that someone is pulling out of the air (or a somewhat lower area from which things like this are known to emerge). Hilary Rosen is going to have an even tougher time trying to explain what's going to happen next without making the tale of pirates sound even more like the fictional account than it is. Before I continue, however, if anyone spots an error in the charts above, let me know and I'll correct them. As I said, some data was extrapolated. If you've got a real number, let's hear it (and the source). Not that's it going to matter much. The record companies are going to realize that the pirates are not the consumers that downloaded a few mp3s. The real pirates are coming and they're going to do more than steal a few songs from you. We're going to tear down your castle walls. RevisionOriginally, at this point in the story, I outlined a deal that I was offering to those artists who performed at a specific event. This event has since been cancelled, so those details are now irrelevant and I have to rewrite the ending. The basic idea is that -- if the artists must bear all the cost of producing, distributing and payola and the record label is merely giving the artist a loan which must be repaid -- the tables should be turned. The artist should get the majority of the profit and have some say in how their money is being spent. There are 50,000 independent bands listed at GarageBand.com alone. Thousands more can be found at mp3.com (but far less than a month ago), DMusic (just had to add new servers because their artist base is growing so fast) and Vitaminic, just to name a few. More are cropping up daily. Last year, the major labels only released (according to RIAA statements above) 7,000 new recordings. Less than half of the Indies got a release of any sort. And correct me if I'm wrong, but I think that the record industry is paying a little less than 80 percent of the profit to the artists. Let's go back to the RIAAs stats for a moment. Potentially, they missed at least 30,000 available acts in 2001. If only one in 10 releases is successful, we're talking about 300 killer acts (assuming only 10% of the successful acts qualify as "killer" acts). And let's call "success" unit sales of 100,000 (a tenth of what it takes to qualify for the record industry's definition of the term). At $10 a unit, that's $30 million. Take off $2 a unit for actual costs and the profit is about $24 million. I'd give up 75 percent of that, still be very, very happy and have plenty left over to finance the other 27,300 failures. If I can only sell an average of1,000 copies of the "failures," that's still another $2.1 million profit. Take away production costs and I still make more than $250,000 on the "failures."
Radio missed even more music, only playing a small fraction of the abysmally small number of music that actually managed to get released. According to Clear Channel owner Art Mays, at a recent Senate Commerce Committe hearing (Jan 30, 2003), Clear Channel -- representing more than 1,200 radio stations across the country -- added only 3000 songs to their playlists last year, which represented the work of only 550 artists. The RIAA is looking for pirates. They need to look in the mirror. The biggest threat to the recording industry is that they long ago dismissed as insignificant the two elements without which there would be no recording industry -- the music and the artists. Your first table uses Total Dollars and # of New Releases to obtain a Dollars per Release. The problem is that Total Dollars is the income from ALL releases not just new ones according to the first RIAA quote in your article. While older releases will have a diminishing effect on income, I do not believe they can be discounted completely. As evidence, check the RIAA's statistics for multi-platinum certifications. Clearly millions of old releases must have been sold in the past year to account for these certifications. Now the math to account for old releases is much more complicated and I'm not sure how easy it would be to obtain the data needed to properly analyze the relation. The only thing I can say for certain is that new releases will make less than you calculated. Andrew Kreps, Darien, IL |
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RIAA Questions Validity of Own Information By George Ziemann (Feb. 16, 2003) When I wrote my original article on the RIAA's statistics (above), the only data I used was information posted on the RIAA site. I made no attempt to refute their data and the only conclusion I questioned was the claim that downloaded music has severely harmed the music business. I invited anyone to correct my data. I specifically asked the RIAA for clarification of the number of releases in 2000 and 2001. They did not respond, other than an auto-response acknowledging they had received my e-mail. Ironically, when BusinessWeek.com writer Jane Black questioned the RIAA on the numbers I used, particularly the number of releases in 2000 and 2001, they did have a response. They said I must be wrong. They haven't tracked that data since 1999. The thoroughly amusing part is that those figures came from the RIAA. They ARE wrong. A comparison of the RIAA's numbers against those of a more reliable source only raises more questions about the validity of the record industry's current propaganda. The Source In the time that has passed since I wrote the article, the RIAA has removed the source of my information from their index. However, the original article, "The Value of a CD", is still there. (Note: Jan. 29, 2006 -- The Internet Archive did manage to find the original data I was looking for and contains a copy of the original "Value of a CD" as well.) The May 2002 statement, paragraph 7 says:
In today's discussion, paragraph 8 will also be pertinent.
The Reality According to the article in BusinessWeek,
In addition, Edward Carpenter, a graduate of the UC Berkeley School of Journalism and a freelance journalist, pointed out that the 1999 and 2000 figures at the RIAA didn't agree with SoundScan, either. He reports that "Nielsen SoundScan told me 38,857 [new releases] for 1999; 35,516 for 2000; 31,734 for 2001. That's an 18 percent drop from '99 to '01. Revenue in 1999 was reported at $14,584,000; $14,323,000 in 2000; and #13,700,000 in 2001. That's a 6 percent drop from '99 to '01. Seems [the RIAA's] numbers don't jive."
At this point I must admit that my total sales figures for 1999 and 2000 were wrong and I am not even sure why. Carpenter was the only one who noticed this discrepancy, and I thank him for pointing this out. So I reviewed my numbers a little more and, in the process, looked closer at the RIAA data. The RIAA's 2000 Year End Reports Up until 1999, everything was peachy in the music business, at least as far as the general public was concerned. To my general knowledge no one was complaining much about the record companies (with the possible exception of the artists) and most of the general public did not know or care who the RIAA was or what it stood for. Something happened in 2000 that changed all that. Hmmm. What could it be? Not the sound of Wall Street's bursting bubble in April. Never mind that the economy went directly to hell that year, a hole that gets deeper every day. Here was the RIAA's explanation in Feb, 2001:
What Really Happened Let's now refer to the RIAA's 2000 Yearend Statistics and look at their numbers for CD singles. I have added a third row for the average unit price, arrived at through simple division.
First of all, the drop in CD single sales between 1999 and 2000 accounted for less than $80 million. During the same period, cassette sales declined by $435.6 million -- which is $180 million more than the total industry decline. The decrease is "largely attributed to a dramatic reduction" in singles, but the cassette market dropped by five times as much, a much greater factor. And let's not forget this statement: "Despite a very strong first half of the year, the market for recorded music, measured by what manufacturers ship to retail, sharply declined in the last six months of 2000." This probably has nothing whatsoever to do with the RIAA's action to shut down Napster, which began Senate hearings on July 12, 2000 and, if I am not mistaken, dragged out until October or November. Until this point, most of us hadn't even embraced mp3s. We didn't have broadband yet. But we weren't shelling out $4 for one song anymore, either. The truth is that the Napster hearings are when the general public first started paying attention to what the record industry was doing. They didn't like it. But they hadn't stopped buying CDs yet. In fact, CD sales were actually up 0.4% in 2000, which was an increase of just under $400 million in sales -- setting yet another sales records and almost completely counteracting the drop in cassette sales despite a 9% reduction in the number of releases. But already the RIAA was complaining. 2001 -- The Year of the Evil Consumer In 2001, the recording industry began focusing on the consumer and the Internet as the cause of the industry's problem. Copy-protected CDs made their first appearance in 2001. At the same time, they cut the number of releases by 9% for the second year in a row, issuing the fewest releases of any year since 1996. The average price of a CD went up another 20 cents. And for the first time in 10 years, there was an industry sales decline. Remember this from the beginning? "Between 1983 and 1996, the average price of a CD fell by more than 40%." According to their numbers from 1990 to 2001, this average price reduction must have occurred prior to 1990, when unit sales were less than 300 million.
Let's back up a second. "...the average retail price of a CD in 1996 would have been $33.86 instead of $12.75." I only quoted this part to demonstrate that the RIAA calculated the average unit price by exactly the same method I did. I need to justify a number here, namely the 2001 CD Units shipped, as I have also corrected this number. The year 2000 CD Units (942.5 million) comes from the 2000 Yearend Statistics. The RIAA, to my knowledge, has never posted the 2001 year-end data concerning CD sales. Their 2001 yearend report does, however, provide this glimmer of information:
2002 -- The Accountants Take a Vacation Several people had written to ask why I didn't include the year 2002 stats. First of all, since I wrote the article in December, the year wasn't even over. The 2002 numbers did come out a week or so ago. And promptly disappeared. If you do a google search, you'll discover that MSNBC, Yahoo, the Washington Post and several other major news organizations have pulled the story from their web sites. Once you find it, you'll understand why. I found the story paraphrased at one site, which provides a dead link to BusinessTimes as the source.
Similar data was posted at another:
From Australia:
And Stereophile.com latched on to a similar report:
Mysteriously (and no matter how creatively you use your calculator), the SoundScan numbers for 2001 aren't anywhere close to what the RIAA reported. This would mean that the 2001 average price would be significantly higher. The only real number the RIAA gave us was that it was a "$12.9 billion value". If there were really only 688.2 million CDs sold in 2001, then that means the average unit price was $18.75, a 34% price increase. At 712 million, the average price is still more than $18. The other possibility is that someone "lost" 170 million CDs, a conservative value of $2.5 billion -- more than half the number that the RIAA claims it has lost to piracy. You might want to check the back door. |
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Record Low in New Releases "Warner Music International chairman/CEO Paul-Rene Albertini is cutting 150 of its 600 acts, and sources say other WMG labels are paring down rosters." "Last year, sources say, WMG issued about 1,000 titles of the 7,581 new releases Nielsen SoundScan counted for 2003. The company's new-album total will be even lower this year." Note: The above quote was a May 23, 2004 story on Yahoo news, which is no longer available. |
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Piracy or Pathetic Paucity of Product?by George Ziemann -- Oct 8, 2007 Still recycling old advice... Back in December of 2002, I wrote an article called "RIAA Statistics Don't Add Up to Piracy." Almost five years later, that page still accounts for 10% of the pageviews on my site. One of the theories I offered was that maybe the RIAA was just releasing fewer records. The RIAA said my numbers were wrong (despite the fact that they all came from the RIAA's website) because they stopped keeping track of that in 1999. This raised a little interest and some journalists fed me Nielsen numbers for 2000 to 2002, but then the number of new releases suddenly became a national secret. I only saw one story discuss the 2003 releases, but then it was as an aside and the number was so low I couldn't take it seriously. That was early in 2004. The next time I saw any mention of the number of new releases from any credible source was about a week ago, when I read a Time magazine article stating that, "Roughly 12,000 albums are released in an average year..." I'd certainly love to hear from anyone with more accurate numbers for the last four years.
The RIAA's damage is all self-inflicted. They blamed the demise of the CD single on piracy, but the truth is that they just stopped making them, at least in the U.S. In 2003, they apparently decided they didn't need to make albums any longer and went back to selling singles. An industry with a 90% failure rate cuts its new product offering by more than 80% over a four year period. Then it starts suing people because sales are down and it's obviously all the fault of the single mothers, college kids and dead people. RIAA to Charge For StatisticsSeptember 5, 2009 -- That's right, the world's slowest and most deceiving sales reports will now require payment of a subscription to view. Of course, they're not really sales reports, just "shipment reports," but in the past, these things accompanied a press release. More... Was I Wrong About All of This?September 14, 2009 -- Having seen SoundScan's report covering 2007, which showed new releases from 1996 to 2007, it seems to contradict my basic thesis here. First, we've got a few quotes from above that seem to support it:
In fact, Nielsen reported 38,000 releases in 2003, with steady growth to almost 80,000 in 2007. I'd incorporate it into a chart or something, but it's secret "proprietary" information. The thing is that the four major RIAA members (Warner, Universal, EMI and Sony) downsized so far that it is impossible for them to have produced that many albums. They've probably been floating in the 5,000 to 10,000 range which would make all of the quotes make sense, with a bit of exaggeration on the part of Time, which has misrepresented this topic on several occasions. It would also seem to imply that there were 70,000 independent releases in 2007. While the simple truth is that they couldn't have cut their artist rosters so severely (some labels reported 30-60% reductions) and still maintained their level of new releases, it is impossible to determine the truth, especially if you get it from the media. That said, I'm taking the Glenn Beck approach on this one. I would still assert that the majors intentionally cut back releases in 2000 and 2001 until I see accurate, trustworthy data that proves me wrong. |
