The Death of An Era

It has become incredibly interesting to watch the decline of a business that had once been such a powerful machine. That business, is the music industry. The sales of physical albums continue to decline on a yearly basis, while digital music continues to grow.

In 2008 the sales of physical albums dropped by almost 20% to 360 million units (down from 450 million the year prior) throughout the world according to a recent article by The Huffington Post. The Post also details that digital purchases rose by 32% to 65 million world wide.

Looking at those numbers physical albums lost almost 90 million sales from the year prior while digital sales would have gained about 16 million in sales. Adjusting to the increase in digital sales vs. the decrease in physical sales the recording industry is still losing. Even with the increase the industry is still losing 73 million sales for 2008.

Over the past decade album sales have fallen by almost 400 million units. In 2000 album sales clocked in around 733 million in sales (this number represents CD sales only but these account for 95% of all album sales). If we assume an average price of $12.99 the industry has shown to lose over $5 billion since the year 2000.

What has become apparent is that the recording industry is in a frenzy trying to recapture these sales and fill their pockets back with the amounts of money they have lost. Many different reasons can be given for the decline, the most prominent would be the fault of P2P (Peer to Peer file sharing). With the continued rise off lawsuits, and threatned lawsuits, by the RIAA it is apparent that the industry sees itself as being phased out.

There is no doubt that digital copies will be the way in the future, if the industry wants to survive it needs to adapt itself now. The amount of time and money being spent on frivilous lawsuits could be better spent on marketing, and distribution. Not to mention dropping the price of the physical medium itself (the CD) and make it more affordable.

The average cost of the media itself usually clocks in at about $5 a disc, once all is said and done. This includes advertising, studio time and all the other costs associated with making the album. However once you add on retailer and label costs you end up with a price in the range of $12.99~$15.99.

To go back to the point on digital media, it is an incredibly easy (and cheap) medium. Not only is it cheap but it's an easily accessible medium as well. One of the worst parts of buying an album, especially if you're a fan of mainstream media, would be the useless amounts of filler material placed in the album. Digital media would allow people to easily access and buy the songs they want and not waste money on the ones they don't. Apple is currently laughing themselves all the way to the bank, having embraced this method with the iTunes store.

Having now sold over 1 billion songs in the iTunes store appple has made close to a billion dollars, albeit with some of that going back to the labels. Even considering this Apple is continuing to enjoy their $171 per share price on their common stock. While the stock had struggled in the early 2000s it began a rapid climb in 2003 that has led it from nearly $6 a share up to the level it is at today.

Apple has embraced this method as a wonderful medium that his enticed a mass amount of users to use this service. Not only is the service easy, it's free and incredibly streamlined. Searching for your favorite artist, or album, is incredibly easy and most songs have a 30 second sample attached to them. This feature has also been embraced by Microsoft for the Zune MarketPlace and something that labels have yet to jump on.

What would be even better for the labels using this method of distribution would be the fact that they do not have a middle man to distribute the media to. Instead they launch, advertise, and distribute everything themselves and keep all the profit in house. However the industry still appears to want to keep the model of lawsuits against single moms, children, and the deceased rather than revitalizing their industry.

With the loss of major artists over the past few years, Nine Inch Nails, Pearl Jam, and Radio Head, to name a select few; the industry will continue to whither and collapse. Indie artists and labels, however, have seen an increase in their sales over the past several years, hint to the major labels start releasing quality music.

The next few years should certainly be interesting to see where the industry is headed. As it stands they continue to dig themselves into a shallow grave.