First, let’s look at:

The REAL Death Of The Music Industry

 

Michael DeGusta | Feb. 18, 2011, 12:13 PM

In January, Bain & Company produced the following chart as part of their report on “Publishing in the Digital Age” (PDF):

Image: Bain Analysis

Then on Tuesday, someone posted it on Flickr. Subsequently, Peter Kafka of Wall Street Journal’s MediaMemo noticed it and passed it along to Jay Yarow, who made it Business Insider’s Chart of the Day on Wednesday, citing Kafka and the Flickr post. On Thursday, the excellent John Gruber at Daring Fireball linked to it and between those two postings the chart garnered a fair bit of attention, including from the likes of apparent digital music expert Bob Lefsetz (“First in Music Analysis”). No one seems to have tracked it back to the original source nor noticed what happened to catch my eye straight away:

This chart sucks.

What’s Wrong With It

Oh, Bain – I hope no one has hired you for your expert “analysis” in this field:

• The chart uses raw revenue numbers, not adjusted for inflation or population.

• The chart is labeled “Global Music Turnover” but the data is actually US only. ¹

• The chart says “Bain Analysis” but it’s very unclear that they did any analysis, since anyone paying the RIAA $25 can login and immediately see virtually the same chart, albeit formatted slightly differently.

• They fail to clarify how & if they distribute the RIAA’s 16 sometimes vague categories amongst the 4 they use.

The Right Chart

Image: Recording Industry Association of America

All discussion herein is for US recorded music as covered by the RIAA. The above chart is adjusted for inflation & population – for full details, see below.

Obviously the recorded music biz has a significant decline in total $ of sales since it’s peak around 1999-2000. But, then the industry had quite a run there from 1986-2000.

So what do you think accounts for the decline in sales, especially the decline since 2005?

1. It’s all those kids ripping off the poor studios by file-sharing copies of music
2. Um, a whole lot of discretionary spending has tanked since 2006. We had a Great Recession, recorded music is actually kind of a luxury and not essential and the only people with rising incomes are the Wall St types and they don’t listen to that much music.
3. Well, most of the new music is crap that doesn’t sound that good thanks to all the new fangled processing – certainly not as good as the old days when the world’s greatest rock-n-roll band recorded on vinyl.
4. It’s not really a good business practice or sound marketing strategy to be suing your customers all the time for alleged copyright infringement.
5. Wasn’t 2001 when Michael Jackson’s last album came out?  Bieber just can’t compare.

SO what’s the correct answer?  Well it helps to dive a little deeper (see the full article here:  http://www.businessinsider.com/these-charts-explain-the-real-death-of-the-music-industry-2011-2#ixzz1FOmV58XD)   But essentially it seems that the biggest culprit is the switch to digital formats, but not because of any piracy issues.  Instead digital formats (iTunes, MP3 sales) has had the effect of switching sales away from albums and towards singles-only.  Turns out the industry in the past was built on a model of sell a bundle (the album) of mixed stuff.  The one or two songs the people wanted with a lot of crap they didn’t.  In digital world, there’s no need to bundle. Consumers just buy the one song they want and don’t end up buying the other songs on the album.  Result: huge volume drop for the record labels.

Of course, personally, I think it’s still a lot #3 above.