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Wednesday, April 11, 2007

CD Sales Declining - Why a Drop of 20% in 2007 Should Not Be Surprising


CD Sales Drop 20% in 2007
I've been meaning to write this post for a few weeks now, but work has gotten in the way! :-) In late March, it was reported that CD sales were down 20% from a year ago. Hold the phones! CD sales are dropping? What! Why would that be. Ok, you can probably tell I'm being sarcastic... I know this has to be reported, but did anyone think it was groundbreaking news?? This is part of a 7 year slide, that by the way, will not slow down...at all.

Music Sales and Systematic Automation
So, why is this happening? To me, it's a form of systematic automation. Technology advances and products and/or services that were once used now become obsolete. Consumers can now buy the 3 songs on an album that they like and let the other 12 hang in bad-song limbo (like they should). Let's face it, the concept of a "cd" or "album" is dead. I, along with many others, knew this was going to be the case in the late nineties when Napster hit the scene and people started downloading full albums at a time, not songs, but albums. Yes, it was illegal, but that didn't stop anyone at the time. The recording industry should have embraced the technology instead of fighting it, but that was a long time ago...

Some Music Sales Perspective
Based on my post so far, you might think that everyone is downloading music, but let's not jump to conclusions. Over 85% of music sales are still CD's. This is probably the 40+ age group that still doesn't fully understand what digital music is all about. My father in law (59) thought that the quality of an MP3 file would be much less than a CD. So I quickly took out my ipod and saw his eyes light up when he heard the first song. This age group will learn, just like they learned to use a computer and access the web. My father (69) now browses the top travel and real estate sites on his Dell laptop. Enough said. The 85% of sales from CD's will decrease drastically over the next several years. Why in the world would you buy a CD when you can just purchase the songs you like?? I don't. It's just an education issue. Consumers aren't stupid and once they learn that they can spend $3 versus $15, they will...

1 Billion...
Now let me introduce a staggering statistic. There are still an estimated 1 Billion songs traded illegally each month on the web. That's 1 Billion songs. (Note, I am now pointing my pinky at my mouth like Doctor Evil from Austin Powers). Let's translate that number into potential revenue. If even 5% of those songs were downloaded from a paid service like iTunes, that would be ~$50,000,000 in revenue per month. Yes, that's 7 zeroes and a lot of money.

Stop Complaining and Embrace the Technology
Instead of sitting and complaining like the recording industry has done over the past 7+ years, they should get creative and think of other ways to generate revenue. The genie is out of the bottle... Actually, the genie is out of the bottle, took a flight to Key West, and has been hanging out at Sloppy Joe's drinking tequila shots by now! The recording industry needs to embrace technology and change with it versus fighting it. And by the way, movies are next...

In Closing
So, as I download 6 songs this morning from across 4 albums on iTunes, my 12 year old neighbor is probably downloading 50 illegally, his mother is probably jotting down the 2 CD's she wants to buy today, and the 72 year old woman that just walked by my office window muttered, "So, what's an MP3?". The recording industry needs to see all 4 of these situations as business opportunities and they will be in a much better place than they are now.

Long live digital everything!

GG

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4 Comments:

  • At 4:41 PM, Blogger Ozlem Dinc said…

    hi, got some advices for the music industry? :)

     
  • At 9:00 AM, Blogger Glenn Gabe said…

    Hello Ozlem.

    Thanks for stopping by and yes, I definitely have some advice for the music industry... Actually, I've had this advice since the late 90's when Napster hit the scene and the music industry started scolding people for downloading music. Yes, I don't agree that illegal music sharing is right (I use iTunes and pay for my music), but instead of wasting time trying to win a fight that they cannot possibly win, the music industry should determine new and viable business models.

    Personally, I would start by targeting teenagers/college kids and then people that are 50+. The 50+ age group simply needs to be educated...they have money and would use paid music services like iTunes, but have no idea what it is or how to use it. The teenage/college kid group probably will not stop sharing music illegally...so a different model for generating revenue needs to be determined...and that probably cannot happen via this post! :-)

    Anyway, let me know your thoughts. I'd love to hear your feedback.

    Thanks again.

    Glenn

     
  • At 4:20 PM, Blogger Ozlem Dinc said…

    Hi Glenn,

    I work in the music industry and we all see the sufferings.

    I am not insisting on convincing people to legally buy music, as the process is now almost irreversible. But I believe that people is still willing to pay for something else: being a part of a community and feeling privileged.

    I think it is time to change the way things are working by promoting others values (feeling privileged) through music.

    so, it is now time to "brainstorm" and see what the new generation or potential buyers care for and bring them together with music.

    What would YOU pay for? :)

    best,
    Ozlem

     
  • At 3:21 PM, Blogger Glenn Gabe said…

    Hi Ozlem.

    It's great to hear your perspective, since you are part of the music industry. I wish more people across industries would do the same.

    The concept of paying for additional content or being part of a community is an interesting concept for music. Deals on concert tickets, the ability to win contests (worth money in the community), and the ability to participate and earn power in the community all seem viable. (I guess the market will dictate what flies, right?) :-)

    It sounds like a web 2.0 music community is what you are referring to. Is that correct? The ability to earn virtual credentials in the music community, which could give that user more power? Very interesting. What are your thoughts?

    Regarding what I would pay for, I'm 35, so I'm not sure what type of content or community involvement would interest me... I guess deals on concerts or the ability to earn more power in the community, which could lead to exclusive content/music would be interesting.

    What do you think?

    GG

     

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