Record Sales Haven’t Hit Bottom Yet

Posted on 04. Sep, 2009 by in NEWS

cd sales down 300x225 | Record Sales Havent Hit Bottom YetAlbum sales continue their rapid decline, falling 18.1% this month over August of last year, and 37.2% over the same month in 2007. According to Billboard August had the “worst year-over-year deficit of the entire year” but was preceded by decent sales in July. “That five-week period, starting June 28 and ending August 1,” the report states, ”was down only 10.3% versus the same five-week period in 2008 and 22.8% compared to 2007.”

Track Equivalent Albums, or TEAs, were down just under 13% in August. TEA numbers include individual track purchases along with conventional album sales. I’m not a big fan of this metric, as it compiles downloaded tracks into “albums” and combines them with physical album sales. While it may provide a better big-picture look at record sales, it can be somewhat misleading in the way it adds up these artificially assembled ‘albums.’ Just another way that the industry is trying to cling to the way things were done in the past.

Worth noting is the stark drop in individual track downloads in 2009. The year began with weekly download sales at about 25 million per week and by August had dropped by about 5 million to the 20-21 million per week range. The Billboard report offers its explanation:

It must be noted, however, that the cause of the drop in track sales – variable pricing and $1.29 at iTunes for most hit songs – has resulted in an increase in wholesale revenue to labels.

If this is true iTunes obviously has a little too much influence over the market. When a single retailer captures about 69% of all digital downloads a change in its pricing structure has significant effects on the larger marketplace. Variable pricing has proven to be a mixed bag of success, driving revenue up but sales down.

One thing is clear – record sales have yet to bottom out. Just another indication that this wild ride is far from over.

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11 Responses to “Record Sales Haven’t Hit Bottom Yet”

  1. Paolo

    04. Sep, 2009

    I’d like people to take a little time to examine what’s happening in CD sales retail & mailorder. In UK several of the biggest retail CD stores such as Woolworths (also was the No.2 main wholesale distibutor) & Zavvi have ceased trading or like big chains WH Smith & Comet stopped selling CD’s instore completely.

    Current sales practices seem to distort Industry figures.

    Certainly the bulk of my CD purchases are made through a UK satellite of a US online store. Expectation is that these sales are recorded as US sales not UK.

    A few months ago the picture below turned up in forums about a remaining main chain store a few hundred miles away. I checked my local store, same price £26, but being a larger store mine had the same Country section but also a Pop section where the identical Taylor Swift CD was IIRC £9.99 (now £12.99)
    http://img35.imageshack.us/img35/7576/1606091042.jpg
    Note the CD displayed is Taylor’s first album ignore the shelving label “Fearless” . £26UKP is around $40US. Taylor’s second album “Fearless” was in the Pop section IIRC £8.99 at the time & is now £6.99.

    Think of a parents anger when going to buy their daughter a Country Star Taylor Swift CD, they probably won’t know or bother to look in the Pop section for the normal priced product at much less than half the price. Another possible sale for download or import? More likely in my opinion to chalk one up for torrent & starting a habit.

    Let’s look at my online experience this week.
    Thurs I went to an artists webpage about a new album CD due out end of Sept, I had got indication that downloads from Amazon & iTunes would start selling 7 Sep 2009. There were three CD online links for Amazon, Play & HMV.

    Play.com RRP: £15.99 – Pre-order discount £7.04 = £8.95
    HMV.com list price: £10.99 – Pre-order discount £4 = £6.99
    Amazon just final price £6.98
    I don’t query these online choices of selling price but just the inconsistant starting prices.

    (I went back to examine my facts just now to take more page images and see that Play.com have put the CD release date back to 25 Jan 2010 ????? ) No wonder customers get angry and keep money in pockets! I know several forum members who will be tempted to kill their Play.com pre-orders, they are already upset that the release date has slipped before.

    Do record companies & retailers self regulate ?
    I don’t see any attempt to maintain reputation. Statutory bodies such as “Trading Standards” seem absent by their silence….

    • refe

      05. Sep, 2009

      £26? Maybe somebody forgot that it’s been about 11 years since 1998… ?

  2. Paolo

    04. Sep, 2009

    I meant to reply to your comment “Variable pricing has proven to be a mixed bag of success, driving revenue up but sales down”

    What if the lost sales volume decides to move to torrent & aquires a habit ? The Industry might see initial belt tightening as people say NO to the higher prices & wait for the premium to be removed !

    I gave up paying premiums on CD’s a while back and wait for a reasonable price weeks or months later. The Industry should note that if something else turns up to get the money during my wait for a fair price, then the something wins. The money is gone period!!! The original sale is gone, I would have excitedly bought 2x CD’s, I bought 1x CD and resent the Industry for not offering a decent price on my original selection that I really, really wanted.
    Losers!! Why would I buy a product that I’m no longer excited about ?

    Down the road will others make my choice but for downloads and turn temporary NO’s to become permanent NEVER’s and lose the mass Pop market as well ? Did customers get what they wanted anyway elsewhere or lose excitement ? Pop music has a sell-by
    date, play brinkmanship too often and the sale is gone. The saleman gets a reputation so future sales vaporise as well…..

    Yeah, in endless desire for more short term gain, another big chunk of trade disolves away.

    The real sales have plenty to fall yet as Industry owners grab more quick rewards and push towards another man made crevasse……..

    • refe

      05. Sep, 2009

      I don’t think you’re alone in your frustration.

      Your point about the retailers hastening the declining record sales is well taken, as well. Perhaps if there were a more concerted effort – both ends of the record industry working together to deliver the product successfully – it would help delay the inevitable.

      Unfortunately, I think we passed the point of no return a while ago, so I’m not sure how much any of that would really help. The bottom may still be a couple years off, but I think we’re going to have to hit it before this industry turn itself around and start climbing back out again.

  3. Gabriel (gcn1)

    05. Sep, 2009

    It’s quite obvious I don’t buy CDs anymore…maybe one or two a year at most because my most recent foray into a physical record store was shocking only because it has been at least three, maybe four years since I walked into one.

    What was shocking (maybe it really shouldn’t have been but regardless) was how much the store looked like a merch table at a concert. The focus was on selling anything but CDs… making it quite clear that the sales focus was no longer the CD.

    So revenue is up, but sales are down. That’s not a particularly good sign… that said, each time I read about these figures, I really don’t know how I should take these numbers.

    First, no one truly knows how sales are calculated or if the calculations make any rational sense. There is no transparency. And second, these sales figures, if carefully presented, become political fodder for those most affected by it. It’s perfect for using it to claim that piracy and file sharing is “killing” the business when the reality is that bad decisions and lack of foresight is killing those not willing to adapt and move forward.

    I really wonder if one day in our lifetime, we will truly see mainstream zero dollar pricing for music which will pretty much render CDs a relic of a previous economic and cultural time. It seems like we are heading that way… primary income will come from completely different sources as some artists are starting to prove.

    Crazy, tumultuous times… making a living as musician is forever going to be a tough endeavor. It certainly isn’t going to get easier!

    • Paolo

      06. Sep, 2009

      “… claim that piracy and file sharing is “killing” the business when the reality is that bad decisions and lack of foresight is killing those not willing to adapt and move forward. …”

      Well said… Don’t know if you can get into the BBC UK Radio 4 site http://preview.tinyurl.com/kplxod “08:55>13.00″ but The Register has a good writeup of the broadcast 04 Sept. “Music industry cooks UK government’s piracy stats” http://preview.tinyurl.com/mx8j2k

      • Gabriel

        06. Sep, 2009

        @Paolo: Yep, I caught that article a few minutes after I posted my comments. Numbers tell a better story than any set of words. Mark Twain said it best: “There are three kinds of lies: lies, damned lies, and statistics.” A good way to boost a weak position is to by throwing numbers around.

        For me, the ideal consumer experience as a fan is to be able to buy direct (mp3s) from an artist/band.

        But, I’m so amazed at how difficult it is to do (one band I really liked only accepts money orders, go figure). Great, I know I can go and buy from iTunes (which is what most of them tell me when I inquire) but what if I, like many other music friends I know, don’t want to buy through iTunes? I’m not saying don’t sell your music through all these channels because they are important for widespread distribution. Just give me the choice to buy directly from you!

        If a mom with 4 kids in a small city can bake and easily accept PayPal payments for her amazing gourmet, homemade cookies, then bands can just as easily do the same.

        Ultimately, what it boils down to for me is, can we cut the middle man out so that when I buy something from a band, they receive the entire amount. I would hope and expect that even after covering transaction/sales costs, they are still ahead compared to iTunes etc.

        • Paolo

          06. Sep, 2009

          @Gabriel: ah:) yes a better way to tag a reply..

          Your observation that artist/bands don’t use the range of options available is spot on. I don’t know if our host @refe ever posted results from his research into MP3 hosting/sales particularly with customer side widgets.

          I offered up http://www.ourstage.com because I’ve used the site many times for some favourite bands. IMO it’s a messy site with small print but it seems very popular. I’ve not seen anyone use http://www.bandbox.com other than the big artists even when Bandbox offer 100% deal to unsigned acts. Then a mass of artists I watch use http://www.reverbnation.com for hosting music but as far as I can see none use the sales facilities (perhaps sales not enabled yet? )

          Cutting the middle man looks a good choice when unsigned and there’s no chart position to chase. Why refuse potential for money in the bank ans building a fan base ? I wonder if big artists are using Bandbox then it might be feeding into Chart stats…

          • Gabriel

            07. Sep, 2009

            @paolo: Oh man is there ever a dizzying array of services out there for bands/artists to choose and implement. It isn’t easy and can be very time consuming to get all set-up and working smoothly.

            As a music fan, I have purchased music using a service via Nimbit.com. It worked really well for me, and wish other artists would consider these types of quick purchase services.

            WIth music being very emotional driven and also fleeting,
            the most immediate and direct goal is to make the sales process so slick and frictionless. People typically buy when they are in heightened emotional state (sad, happy, hungry etc), so the need to capture those sales is critical. And even more importantly is what happens after sales, the direct to fan relationship activities that builds what is hopefully a long-term bond.

            The tools are out there… it’s the mind-set, planning, execution, consistency that is critical which goes beyond any possible tool or service you can buy.

            And one last point… It is unfortunate that some people will always chase sales figures, chart position and front cover attention. Is that really focusing on getting your music out to people who really care and will support you regardless of how popular you are on the charts? The choice is a) build a long-term career/business vs. b) being the flavor of the month.

            BTW, thanks for the great discussion!

  4. Dion Roy

    05. Sep, 2009

    I can’t say Im surprised at those numbers, I recall reading an article several months ago this prediction exactly – I want to say WSJ but I may be wrong.

    Frankly Im surprised it took this long for the decline to kick in. I don’t expect to ever make significant money from my albums for some time. Ill be relying on merch, my iphone app, and placements.

    I don’t think we are going to see major changes in album pricing until its too late to sustain the model.

    Anyway…back to work…

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