so, no one’s buying music these days, right?

Wrong. At least according to Sean Boyd of Fanatic Promotion, in this video. Basically, the number of songs sold (in both physical and digital media) has increased quite a bit over the last decade or so – but because the per-unit cost of those songs has gone down, and the industry hasn’t caught up with that price drop, it can’t meet its costs. (As an aside: I don’t watch Fox Business…and so I’m wondering: are all their correspondents this low-wattage? None of them seem to get it at all, and the lame joke at the end about “recession-proof” seems oblivious to the fact that Boyd has been talking about a ten-year period, not the last few months.)

I remember thinking, several years ago and before the digital boom, that it was odd that prices of CDs had never really fallen. Considering that from a rare, expensive new technology selling only to geeky audiophiles, CDs had evolved by that point to the dominant music medium – which of course meant that manufacturing costs per unit had dropped, and the risk of producing a new experimental medium was clearly no longer an issue. My theory at the time also was that CDs had come along at a propitious time for the music industry: suggested list price for LPs immediately before CDs came along was $9.99 – just shy of the psychologically significant ten-dollar line – but introduce a new, shiny medium, advertised as having better sound and lasting longer than LPs (both true – shut up, vinyl fetishists), and that ten-dollar barrier is shattered like your grandma’s shellac 78 dropped from a great height. But prices dropped only slightly, in dollar terms, from their initial introduction (I think they started at just shy of twenty bucks, dropped to around fourteen or so, and rose slightly, to where Boyd can talk about a $17.98 retail price: one reason I’m sketchy on this is that I am not a moron, and so I never paid mall-store retail prices for CDs, which were always three to four dollars higher than you’d pay at an actual record store).

CD prices should have been cut dramatically as digital downloads became viable…even more so as CD burning became possible. The industry should have immediately realized which way the wind was blowing, and both gotten into digital media much more quickly than it did (I cannot believe iTunes didn’t exist until 2001…and of course iTunes was not introduced by the music industry at all) and worked to create value-added packages with CDs that included any number of non-digitizable add-ons – anything from discounted concert tickets to price-off to people who upgraded their old LPs to the sorts of amusing swag that was sent out with promotional packages. But they did not: they just assumed that people would continue to buy CDs.

Another fault is the way the industry was built on blockbuster titles (I seem to recall that Alanis Morissette’s Jagged Little Pill accounted for something like 1 out of every 7 dollars its label made the year it was big), and it was precisely the most mainstream, popular titles that were most bootlegged (duh). I also wonder why it is that labels still haven’t figured out that since creating and maintaining physical media is one of the hugest costs associated with back catalog (particularly since tax laws were changed sometime in the early ’90s on such items), making back catalogs available in digitally-exclusive editions would have been attractive to the people who still buy music (older people, who actually have money to buy music with). I mean yeah: someone would have to digitize the recordings in the first place – but after that, very few additional costs directly associated with those recordings, assuming the company maintains a download site to begin with. The advent of digital music should have meant the near-elimination of the concept of “out-of-print” – since “print” was now just a file on a server somewhere. Why didn’t that happen? My guess: the industry clung to its “sell a bazillion copies of three titles” approach instead of “sell three copies of a bazillion titles.” With physical media, those two are nowhere near equivalent; with digital media, they’re much closer.

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7 Comments

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7 responses to “so, no one’s buying music these days, right?

  1. villain

    did you see this?
    http://preview.tinyurl.com/dmg9bb

    it’s an interesting little piece in which Arrington from techcrunch talks to an allegedly big but anonymous music exec about the future of the music industry. basically, he says they’re trying to eke as much revenue as they can out of the existing machine before they shut it down.

  2. $17.98 in 2009 dollars is less than $9.99 in 1983 dollars, I believe. Failing to keep pace with inflation is a form of price decline.

  3. Tim – there’s some wiggle room there, yes. I do remember at some point in the late ’90s checking on the value-adjusted price and discovering that it was still considerably higher than LP prices had been prior to the introduction of CDs.

    But the real point is, since music is easier to come by, those prices needed to have fallen even further, in order to be perceived as fair by consumers – who voted against the prices with their wallets (by not buying them).

    I think another factor here is the death of the single: for about a decade in the midst of the CD boom, if you wanted just the hit single, you had to buy the whole CD. Once it became feasible to have only the single again (via download), consumers rushed to do just that – and rather than immediately making hit “singles” available on their own for download, it took several years…while the guy who founded Napster became rich. For a while, anyway.

    I wonder what would have happened had there still been singles once the pop charts shifted back to singles-oriented music (as opposed to album-oriented stuff in the late ’70s and early ’80s). Somehow I don’t think even Britney’s biggest fans really need entire albums from her – a new song or two every six months would probably have been more profitable than albums that exist essentially because the record companies defined them as the only format to physically release music in. (Of course, the industry sorta tried…cassingles, 3″ CDs, etc. – but none of them worked. I’d say those things always seemed too expensive for what they were.)

  4. Mr. V – just read it…interesting. Something I don’t see discussed very often is that the main musical complaint against the download culture is that mp3s just sound like crap. But compare the situation now to even five years ago: downloading a 128mbps mp3 took hours; now, downloading a 320mbps takes seconds. I think before long we’ll be seeing the availability of larger, lossless files like .flac (and not just among the live-concert freak community) or even uncompressed .wav or .aiff files – bandwidth and speed will obviate the barriers to such files. (It might be nice if iTunes could natively handle .flac files…I wonder if that’s in their development queue…)

  5. I think another factor here is the death of the single.

    Maybe… but I seem to remember that taping was pretty popular even before singles died. I think “free and right now” has a strong advantage over “have to drive to the record store and pay money” regardless of the actual amount or format. Which is why iTunes was so successful–it eliminated one of those disadvantages.

    It might be nice if iTunes could natively handle .flac files…I wonder if that’s in their development queue…

    I wish, but I doubt it. There’s no upside for Apple in supporting FLAC over Apple Lossless, just as there’s no upside for supporting Ogg over MP3, until and unless there’s a groundswell of demand. So far most people don’t mind MP3 quality, any more than they minded cassette and FM quality (both of which were/are worse). And there are concerns (how genuine I don’t know) of patent lawsuits over these open-source formats.

  6. Don

    This post is making me want to finally read, Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age, by Steve Knopper.

  7. Singles in the 70s when I used to hang around the department store record stores were about a dollar. Accounting for inflation that is a huge price drop over 25-30 years. Of course, a single had a b side.

    The very first CDs tended to be marketed to audiophiles and were in the $20 range IIRC. The price premium between LPs and cassettes and CDs was a not very hidden price increase as the former lost market share.

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