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By George Ziemann Each year, the RIAA calculates the value of what they shipped out at the manufacturers' "recommended or estimated list price." There are some severe problems with this, namely the fact that almost nobody pays the list price. Judging from Amazon's best-seller list, it would seem that the idea at the retail level is to undercut the list price so the customer can see how much they're "saving." As a result, the cumulative value shown by the RIAA reflects what the retailers would have brought in IF they sold every product at a price point the major music retailers avoid like the plague. It's a fantasy. It's how much the RIAA wishes people would have paid for what they shipped out.  All of these numbers include the retailer's potential gross income, which is significantly different from the label's actual income. Interestingly enough, they know their actual income, but prefer to offer the public their best effort to make it look like something else is happening. |
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The record labels get 70 cents of every 99 cent download at iTunes; $7.00 of every $9.90 digital album. The same principle was applied to mobile. The "Other" category includes kiosk, music video and subscriptions. I didn't discount the kiosk and music video, but subscriptions are a rental, not a sale, so I threw them out entirely. As it turns out, so were any songs sold by Microsoft under the banner of "Plays For Sure." The record labels only get 50% of the royalties they are reporting here. This gives us almost a billion dollars in overstatement in the digital sector alone for 2007. |
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As for the physical formats, that's a pretty easy one, too, thanks to the IFPI's data for 2006, which clearly shows both the wild-ass guess that is the "retail value" at $11.5 billion (which includes digital) and the "trade value" of $6.5 billion, which is what the record labels actually billed out at the wholesale price. I figured wholesale was about 70 percent of retail. If 2006 is representative, it's closer to 56.5 percent. Assuming that this percentage remains constant (which I highly doubt), and taking into consideration the items above, we end up with a sales chart that looks like that below.  |