The Music Market and a Change in Demand – What’s Happening to the Music Industry?

Lately it seems more and more that the recording industry is losing its power.

A statistical overview of the market today is illuminating. The 2008 end of the year shipment statistics report by the Recording Industry Association of America shows an increase of 28.1% in digital units sold between 2007 and 2008 and a 30.1% increase in dollar value. This is due to the rising sales of digital albums and singles, and to downloads of music videos.

While digital performance royalties increased 74% between these two years and US authors society saw revenues and distributions rise for the 2008/09 financial year, physical sales of recorded music decreased heavily between 2007 and 2008, with a 24.7% plunge in CD shipments, a 71% drop of CD singles sales and a 54% free fall for DVD videos and music videos. Total units sold in 2008 were 26.1% less than in 2007 and the revenue decreased by 28%!

In 2008, physical products still counted for 68% of total shipments, the rest being digital. This is of course changing at a rapid rate, as in 2007 the comparable data was 77% and 23%, respectively. Total dollar value fell by 18.2% in 2007-08. Still, analysts concluded that in the past five years the decline in physical sales grew at a much faster pace than the increase in digital sales.

This change in demand towards digital music has not yet fulfilled the promise of restoring the market back to the golden ‘nineties. There are, ostensibly, three additional elements that are holding back industry revenues.

First, there is a shift from full album purchases to single song downloads. Music albums were either complete products or bundles of ten to twelve songs with two or three “hits”. Consumers who only wanted these hit songs had no choice but to get the whole album, allowing the record labels to wrap a small product in a bigger and more expensive package. However, the era of digital downloads brought up to the surface the culture of single song sales. Naturally, this affected total revenue negatively.

Second, there were many different substitute goods for recorded music that exploded with the new technology, especially video games and online movie sales. The Internet, of course, made much more entertainment options available to many more people at a much cheaper price. “The show was stolen” from recorded music and consumers’ time and money distributed differently to the detriment of recorded music.

Thirdly, the most obvious factor affecting the demand of legally produced recorded music is the availability of pirated product. Illegal downloads, it is said, still represents 95% of all downloads. If that percentage were lowered even by a little, the revenue grossed by the labels would rise significantly!



Source by Itay Rahat

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