music_news 91 posts

Stephen J. Dubner co-author of the Freakonomics book expresses his view as well as asks several experts about the present and future of the music industry.

Koleman Strumpf, professor of business economics at the University of Kansas Business School whose papers include "The Effect of File Sharing on Record Sales" on the present downturn: "there is surprisingly little evidence to support the claim that file sharing has significantly hurt record sales." Instead several other factors are suggested:
- "industry has failed to find genres that capture the interests of consumers;
- much of the reduction in sales is the direct result of industry cost-cutting. The major record labels have cut large numbers of staff and severed ties with many artists;
- recorded music has had trouble competing against other products that vie for consumers’ entertainment spending;
- he rise of paid digital downloads made popular by iTunes".

Fredric Dannen, author of Hit... read more

Apple has announced on Tuesday that its iTunes store has sold more than three billion songs. This makes it the world’s largest online music store. Also iTunes “recently surpassed Amazon and Target to become the third largest music retailer in the US”.


Read more:
iTunes Store Tops Three Billion Songs, Apple

A survey by Entertainment Media Research revealed that illegal downloading has reached its highest level ever and the number of people concerned about being prosecuted is falling. (The Guardian).

Out of 1700 people who participated in the survey 43% claimed they’re illegally downloading tracks (last year it was 36%). Only 33% are concerned about the risk of prosecution compared to 42% in 2006.

The report suggests that price is the key factor for such situation and that the industry has to consider differential pricing.

The music industry association BPI replied that: “future success was not just down to new business models but also better protection against piracy, particularly from internet service providers.” "Industry cannot do it alone," said a spokesman. "ISPs as gatekeepers, and government as legislators, must also play an active role in tackling copyright theft if the UK is to thrive as a knowledge... read more

According to the annual Global Entertainment and Media Outlook report issued by PricewaterhouseCoopers last week digital distribution of music will overtake physical sales on global scale by 2011. In Asia Pacific this will happen as soon as 2009, than in U.S. in 2010.

According to the report global spending on music will reach $40.4 billion by 2011 (that’s 12% up from $36.1 billion spent in 2006).

Spending in the U.S. will continue to fall till 2009, but will start to recover that year reaching $11.3 billion in 2011 (However, still less than $11.5 billion spent in 2006).

Music to mobiles and Internet purchases will grow more than 3 times to $6.56 billion in 2011. Conversely, market for CDs will half from last year's $9.65 to $4.5 billion by 2011.
”Album downloads, in the U.S. in 2011, will hit 135 million units while 2 billion single tracks will be purchased on the Internet that year, the report noted. That's a 37.9% increase for albums and a 32.8% increase for singles from 2006.” (Variety.com)

Read more:
... read more

According to a new market research report from Insight Research Corp. DRM related spending will exceed $9 billion by 2012. This will include spending on soft- and hardware “technologies that enable the content owner and distributors to assign and control rights and conditions for viewing, listening, and employing the content present in digital media and applications”.

In 2007 total worldwide DRM spending will reach $1 billion.

Looking back “DRM evolved over the last two decades to serve corporations that needed a means to deal with information piracy, peer-to-peer file sharing, and various regulatory requirements. So in a sense DRM did not arise to meet the needs of end users, and in fact, it may be said to have evolved to spite the end user," says Robert Rosenberg, President of Insight. “… by and large the focus of the DRM industry is to protect the rights of the owner of the content, not the end user," Rosenberg concludes. However, more often than not it is the end user who finally pays the cost of development of DRM... read more

While falling CD sales is a fact, the reasons for the decline remain unclear. A recent study by Felix Oberholzer-Gee and Koleman Strumpf published in the Journal of Political Economy contradicts the music industry srory that file sharing has had drastic effect on CD sales. Whereas organizations like RIAA and IFPI fail to explain how their alarming figures are calculated, the study explains in detail “whether file sharing has reduced the legal sales of music”.

The conclusion of the researchers is that it hasn’t. “Downloads have an effect on sales that is statistically indistinguishable from zero. Our estimates are inconsistent with claims that file sharing is the primary reason for the decline in music sales during our study period.”

This study entitled "The Effect of File Sharing on Record... read more

Last week’s news suggests that labels begin to acknowledge that music industry is changing and even may try to restructure their businesses accordingly.

EMI
On 12 January the EMI Group released a statement announcing dismissal of its 2 top executives, a new cost saving plan and possible decline of revenues for 2006-2007.

The company describes the current market conditions as continuously weak. The Christmas sales were disappointing and albums released in the second half of the year didn’t perform as well as expected.

"In the Christmas trading period, EMI had been counting on strong performance by two key products — "Love," an album of remixed material from The Beatles, and Robbie Williams' latest album "Rudebox".

"Love" performed respectably, reaching No. 5 on the Billboard chart in the United States at the end of December, but "Rudebox" didn't show in the Top 40 in the latest British chart." (read more

At the end of 2006 research companies released some statistics and forecasts regarding the US music market.

In January 2007 US album sales reached 9.41 million units which is 17.6 % less than a year ago (Nielsen Soundscan). The chart-toping album Dreamgirls with 66 000 albums sold is a lowest ever figure for number 1 album sales since Nielsen Soundscan began publishing its figures in 1991.

The digital downloads share in the total volume of music sold is growing. However, digital sales will not compensate for lost CD sales. By 2011 22% of music will be sold in digital format and consumers will be spending $ 2.5 billion on it (JupiterResearch).

Another research company estimates that US consumers will spend much more than that on digital music. In 2010 the figure will be $4.9 bln - almost three times the current level of $1.9 billion (eMarketer).


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A recent report by Forrester Research titled Few iPod Owners Are Big iTunes Buyers  reveals some pessimistic findings about the iTunes service.

2,700 US iTunes debit and credit card transactions had been analyzed over a 27-month period and it turned out that only 3% of online households in US bought music from iTunes in 2006. In the past year an average user spent $35 in the iTunes store. Half of credit card transactions were less than $3.

An average iPod user has bought 20 songs since the launch of iTunes.

The report also claims that since January the monthly revenue of the store has fallen by 65%.

Apple shares fell 3% after the report. Shortly after another paper  was released by Piper Jaffray this time confirming “strong... read more

An article in the Guardian cites some executives talking about the future of the music industry at an industry conference in London last week.

Ged Doherty, the UK head of Sony BMG said that CD sales would drop 50% in just 3 years. The digital music sales will grow 25% per year and that will not offset the decline in CD sales leaving the industry 30% behind in terms of revenues by 2010. “We have to reinvent… we are running our businesses like it is 1982” said Mr Doherty.

There also were prediction that DRM will be abandoned soon.

Demand for CDs forecast to halve in three years, The Guardian

Sales of music on-line show record growth while the CD sales continue to decline. As recently released data from IFPI shows - in the first half 2006:

- Global legal digital music sales rose 106% to $945m (which is 11% of the total recorded music market and twice as much as at the end of 2005).
- The US music market has one of the biggest figures for digital music share (18%). In other countries this figure is: South Korea (51%), Japan (11%), Italy (9%), UK (8%), Germany (5%) and France (5%).
- In the US digital sales increased by 84%.
- Global music sales are down 4% (and are now $8.4bn in trade values, or $13.7bn at the retail level). In 2005, the sales declined by 3%.
- Revenues from sales of music in physical formats declined 10% (compared to the 6,7% decline in whole 2005.)

IFPI Chairman and CEO John Kennedy has said he expects digital sales to make up for the decline in physical sales.

As IFPI claims piracy and peering affects music sales to great extent. This notion is used to explain the... read more