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August 31, 2010 • Editorials, Music Diary

Music Industry Says Sales Still Lousy, Still Blaming Piracy, Still Trying to Raise Prices and Force Album-Only Sales Model

There is a great Veggie Tales song The Pirates Who Don’t Do Anything, where they are supposed to be singing about ‘piratey stuff’ but Larry is singing about … nonsense. At the end they conclude ‘you just don’t get it’. And THAT is exactly what I was thinking when I read the news about the sorry state of album sales at NPR.

Here is the video, just in case you don’t know the song:

From the article:

The month of August — like, basically, every month for the past 10 years — has not been kind to the music industry.

Between August 8th and 14th, only 4.95 million albums were sold, the lowest weekly level since Neilsen Soundscan starting tracking sales in 1991. This past week, sales were up, but just barely: just over 5 million albums were sold, an increase of only 2 percent from the record low.

As you can see from the chart above, album sales have been on a steady decline since their peak in 2000. Digital album sales are growing, but not fast enough to make up the decline in sales of CDs.

So far this year, album sales are down 12 percent compared to the total sales at this time last year, according to Billboard.

So what is to account for this change? The 10x increase in the sales of singles? The fact that the industry keeps pushing prices up even after the 99 cent single was shown to be so effective? The shift to listening to streaming music? Naw! Of course not – it is those darn pirates as usual!

Music industry execs blame the dropping sales numbers on illegal downloads. Exactly what percent of music downloads are illegal is difficult to calculate, but estimates range as high as 20 illegal downloads for every legal download. As for the total cost of illegal downloads, it depends on who you ask.

Seriously? 20:1 pirate to legit purchases? Oh puh-lease!

As mentioned, there has been a meteoric rise in the sales of singles, more than 10x over the last 5 years, but those singles are lower profit margin than albums – especially since people tend to buy the songs they like rather than the whole CD. So what does the industry think? Price singles HIGHER to boost album sales!

According to Eric Garland, CEO of Big Champagne, speaking at the New Music Seminar this week, the real thing killing the album is that $9.99 for an album doesn’t offer a significant discount over the per unit price of a $0.99 song, while historically, consumers have gotten a better deal on albums versus singles.

“Historically, the price of an album was five times greater than a single,” said Silverman, who believes setting the price at a tenth of an album’s cost was a mistake and that even $1.29 is too low. “It should’ve been a $1.99, and then we would’ve seen higher digital album sales because it would’ve been a bigger discount for buying an album.

$2 a song? Those are cell phone music prices! At that price then they would be right – folks would have gone right back to piracy! As it was the increase of single songs from $0.99 to $1.29 resulted in an immediate drop in sales for digital songs – but it did NOT help album sales!

The problem isn’t consumers, but rather the industry. They want albums to rule the world – and like to pretend that is the way things always were. In actuality it is the opposite – for the longest time singles were the staple.

It started as a technical issue – as until the late 1940’s you could only fit several minutes of music on a single sided 78RPM platter. Then with the advent of vinyl 33 and 45 RPM double sided records, the ability to have more than 26 minutes per side of music was made possible. Yet from the 1950’s through the late 1960’s singles ruled the world.

It wasn’t until the advent of the great concept records of rock music such as the Beatles, Pink Floyd, The Who and so on that buying an entire record became almost a necessity. This led to a period where singles of pop music were still everywhere (heck, we have a couple hundred in our house) but for rock, jazz, classical and special interest (e.g. holiday) stuff albums ruled.

The CD era changed EVERYTHING. Suddenly you had pristine quality audio, and people didn’t want to listen to vinyl anymore. But while CD prices were a minor premium over albums (~10% if I recall), CD singles were prices 2 – 3 TIMES what a 45 cost! Sales of CD singles plummeted … and as a result the record industry dug even deeper into their dependence on the higher profit record album.

During this time folks started getting more and more used to having THEIR music everywhere – tape decks were in cars in the late 70’s, the Walkman and followers came in the early 80’s, and by the 90’s portable CD players were everywhere. It wasn’t until 1995 when ‘home’ recordable CD systems were available – and even then the systems were ~$2000 and each disc cost $25!

But as the late 1990’s came along, something happened … actually a BUNCH of things happened! The cost of recordable CD media and drives plummeted, the ability to record digital music into computer files (MP3) became feasible based on existing computer hardware, the first portable MP3 players were introduced, and the internet started to become much more common. People suddenly had the ability (and with a 32MB MP3 player, the necessity!) to pick and choose their favorite songs to take with them all the time.

And suddenly the public came to a realization – they no longer had to consume music the way that record companies dictated. Sure folks had been recording records and CD’s to tape for years, but with the advent of a quick, portable, and lossless (from copy to copy) way of storing songs and putting them on a portable player – with excellent audio quality compared to portable tape players – the digital revolution was well underway.

But the record industry had no interest in changing their business model, so they kept charging ~40% of a full album price for a CD-single and completely resisted digital sales. But they DID take some actions, such as starting to make CD’s that carried DRM to prevent copying. In the years that passed this eventually came to a head as Sony infected CD’s with a ‘rootkit’ installed that installed spying software on user’s PC computers, and completely refused to play on a Mac due to the inability to install that software. Total outrage ensued, eventually leading to a lawsuit that Sony lost.

But technology wasn’t waiting. There were two main applications that dominated the pre-Web internet: messaging and file transfer. There were various protocols for each, but those were the basics things going on. So it shouldn’t be surprising that in spite of the news and information-based content that gained such high profile as the popularity of the Web rose and data transfer rates increased, file transfer and messaging were extremely popular. IRC chat channels became ‘mIRC’, with files attached for transfer; newsgroups were formed solely for transferring binary files; but all of that was ‘small potatoes’ compared to the upcoming ‘peer to peer’ revolution.

Seemingly overnight sites like Napster and the like sprung up, and people were able to search out a single song and download just that song from other users who already had it. The initial implication from naive folks like me was that this very simply an internet version of the ‘borrowing a friend’s record’ so many of us had done as kids and that had generally been excused under ‘fair use’ principles as long as it was not for personal gain or broad distribution.

My personal wake-up call came when my older son got a pirated video game as a 5th birthday present. Yes, that meant that another kid’s parent pirated a game and wrapped it up as a present! Not only is that the height of tacky – and illegal – it was shocking to me because it wasn’t some scraping-for-money college kid that I had been reading about. These folks had just added a built-in pool on their new construction house that summer and were planning an outdoor hot tub in the spring! It opened my eyes and made me realize that piracy had become a casual habit for the middle class.

Before then pretty much everyone was already aware of this and the lawsuits from the RIAA began, and young people were getting fined and brought to court with outrageous charges. At the same time Apple was launching its iTunes Music store. What they wanted was ‘legal music for everyone’ at a price people would pay and would give the record companies a fair price for their product – 99 cents for songs, $9.99 for albums. iTunes might not have been the first – but it was certainly the first time it felt like simplicity and fair pricing was a goal (I remember Sony having an awful store charging CD single prices for each song …and even then you didn’t ‘own’ the song!)!

Simple – and effective. iTunes was wildly effective, and soon grew to the point that in terms of pricing and number of artists the rationale for piracy shrank greatly to being a ‘rationalization’ in stead of a reason. Of course people still did it – some justified based on money, others DRM, others were ‘sticking it’ to greedy industry labels, and so on. But since the Napster days, it seemed that the industry and RIAA saw pirates everywhere like some sort of 50’s era communist witch hunt!

As I said, Apple made such a successful store that the success of iTunes built it into the largest music retailer, larger than Amazon or Walmart! And as usual, instead of seeing the move to digital distribution as a successful means of reducing piracy and trying to build competition in a positive way to broaden distribution, the industry was still hung up on the shrinking sales of albums and increase of single song sales. They were also scared of the success of Apple, and wanted to wrest control back. But what leverage did they have?

DRM. Apple’s songs were stuck with DRM that limited the number of copies and prevented them from being ported around from device to device. So the industry started making deals with places like Amazon’s fledgling MP3 store – deals to offer MP3 songs DRM-free. Apple very much wanted DRM-free music and had wanted it from the start, but the only way they were able to get it was to allow the industry more freedom with pricing.

That more or less means ‘raise prices’. Because however they wanted to sugar-coat things with ‘some prices increase, some stay the same, and some drop’, when a 40 year old jazz song by someone who has been dead for more than 35 years suddenly jumps to $1.29 … any credibility about a strategy of pricing goes right out the window.

Immediately after Apple allowed price increases, every other digital store similarly increased prices. Apple had gotten their desired DRM-free music, but the cost was an across-the-board price hike. For my kids, they immediately saw that $15 gift card from Grandma that used to buy 15 songs suddenly buy 5 songs fewer.

Now surprising, as I mentioned, sales dropped immediately upon the price increase – and while I have no data, I somehow doubt that listenership dropped. What I assume is that the people who were pirating before, but could afford to pay and came to the legal music fold with iTunes, looked at the new pricing and said ‘they’re going to screw me? Screw THEM!’.

So as I started out – THEY JUST DON’T GET IT!

People WANT to be legal consumers of music, the rampant success of iTunes has shown that. They want to reward the artists who create the songs they love … but nobody likes to feel like they are being treated unfairly, and even less like they are being screwed over by companies searching for the threshold of maximum profit and trying to force them to buy stuff they don’t want in order to increase profit even further.

I remember back in the 70’s – the heyday of the album – thinking when my brother got it that John Lennon’s ‘Shaved Fish’ was an actual album … and a darn good one! Quickly I learned that it was a greatest hits of sorts, and ended up being pretty much every good song from all of his prior records. So if you bought his recordings you would get 2-3 excellent songs and loads of mediocre stuff. The record companies would like to have you think that getting the ‘whole story’ is in all cases essential to the musical discovery process.

There IS a case for the ‘discovery process’ wherein you find gems that you would never have bought based on a 30 second sample. I look again at the 70’s and buying music from The Who – I bought The Who By Numbers when it came out and the double pack of A Quick One & Sell Out. In both cases I now mark some of my favorite songs – Rael, Blue Red & Gray, Sunrise, and so on – as ones I wouldn’t have thought twice about on an iTunes quick-scan.

But … the discovery process should be an opportunity, not a mandate. Listeners should be getting more recordings like ‘Dark Side of the Moon’ or ‘Joshua Tree’ that lead us to happily open our wallets, and fewer ’21st Century Breakdown’s where we regret all but a couple of tracks.

So to the record industry – WAKE UP! Piracy is a problem, and it will ALWAYS be a problem. Instead of alienating your customers with lawsuits and raids on young kids and grandparents – which is even worse than the abusive relationship video gamers and movie watchers face – try to find an incentive TO BUY your product! Making it more expensive, more restrictive, and pushing to only be able to buy certain products in certain ways … these ARE NOT incentives, but rather the first step back on the path towards rampant piracy by even those who WANT to pay for music.

You guys just don’t get it …

Source: NPR

6 Responses to " Music Industry Says Sales Still Lousy, Still Blaming Piracy, Still Trying to Raise Prices and Force Album-Only Sales Model "

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