There are no stranger beasts in the business world than the major music labels. Only these creatures, represented by their legal attack dog the RIAA (Recording Industry Association of America), would apply an excusatory tone to the release of product shipment figures that show a significant increase in sales. Where other companies would brag, the music labels warn that making money is really quite excruciating and depressing.
The RIAA has just released US music sales figures for the first half of 2004. Heaven help us all - CD shipments were up 10 percent compared to 2003 and revenue was up around 4 percent. This is the first time in five years that the first half figures have jumped year-over-year. That's great news, right? Well, not so fast, consumers. You still need to do quite a bit more to help out the emaciated labels.
"The record industry has experienced some gains so far in 2004, but we are rising out of a deep hole and still have a long way to go," said Mitch Bainwol, Chairman of the RIAA. "Piracy, both online and on the street, continues to hit the music community hard, and thousands have lost their jobs because of it."
The RIAA demands that while 2004 sales look pretty good, they are just not up to the glorious levels of 2001 when the labels pulled in $14bn.
So what are the labels doing to try and bring sales back? Well, as the RIAA highlights in its press release, the pigopolists have this year teamed with the FBI to create a new anti-piracy warning seal, they've expanded their lawsuits against teenagers and promoted DRM-infected music stores. All of these being sensible measures to encourage a disaffected customer base to return to the fold and spend $17.99 for an album at a Virgin store.
"The foundation for success is in place," said Bainwol. "Continued growth requires innovative business models, aggressively making music available to legitimate digital services, public education, appropriate legislation and a strong measure of deterrence. We still have our work cut out for us, but the encouraging news behind these numbers confirms we are on the right track."
Nothing says "please buy our over-priced boy band spew" like a strong measure of deterrence.
While examining the latest RIAA data, we stumbled upon a separate collection of figures that lays out the consumer profile for the average music buyer. One bit of data in this set (PDF) really stands out. Since 1999, the labels' true glory year, the majority of music sales have shifted from traditional record shops to other retailers. In 1999, 45 percent of sales came from the record shops, 38 percent from other retailers and 8 percent from music clubs. In 2003, only 33 percent of sales came from music shops, 53 percent from retailers and 4 percent from music clubs.
That's a compelling trend when you think that stores such as Best Buy and Wal-Mart try to push CD prices as close to $10 as possible, while record shops tend to price CDs much higher. A recent Rolling Stone story points out that Wal-Mart has become the largest music seller in the US, selling one out of every five albums. Wal-Mart is now doing everything in its power to drive the costs of CDs down - much to the labels' dismay. Many of you will recall the labels have had issues with over-active retailers before and were accused of trying to stop cheap CDs by price-fixing the products. The labels later had to pay up for harming consumers.
The upshot of this is that consumers are meant to ignore higher sales of cheap CDs, a sour overall economy for the last three years, lawsuits against consumers, a price-fixing scandal, a Harvard study that shows no line between file-trading and lower sales and believe that piracy is driving a slowdown in overall music sales. Makes perfect sense. No wonder the RIAA is agonizing over increased recent revenue. ®
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