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CD Death Watch: One more Christmas

Another post in my occasional series on the impending death of the compact disc. Today’s entry: This could be the last good Christmas for the music industry and its CD sales.

Despite costly efforts to build buzz around new talent and thwart piracy, CD sales have plunged more than 20 percent this year, far outweighing any gains made by digital sales at iTunes and similar services. Aram Sinnreich, a media industry consultant at Radar Research in Los Angeles, said the CD format, introduced in the United States 24 years ago, is in its death throes.

“Everyone in the industry thinks of this Christmas as the last big holiday season for CD sales,” Sinnreich said, “and then everything goes kaput.”

It’s been four years since the last big shuffle in ownership of the major record labels. But now, with the sales plunge dimming hopes for a recovery any time soon, there is a new game of corporate musical chairs afoot that could shake up the industry hierarchy.

I’ll pause here to note that one of the features of the Chronicle’s online edition is a little box called “Search Results”, where they have links to related stories in their archives. One such piece is headlined Tough tactics give music industry new sales hope, dated January 14, 2004. It’s about how the industry’s combination of suing downloaders and aggressively entering the online music sales world would finally reverse four years’ worth of declining sales. So much for that.

For the companies that choose to plow ahead, the question is how to weather the worsening storm. One answer: diversify into businesses that do not rely directly on CD sales or downloads. The biggest one is music publishing, which represents songwriters (who may or may not also be performers) and earns money when their songs are used in TV commercials, video games or other media. Universal Music Group, already the biggest label, became the world’s biggest music publisher on Friday after closing its purchase of BMG Music, publisher of songs by artists like Keane, for more than $2 billion.

Now both Universal and Warner Music Group are said to be kicking the tires of Sanctuary, an independent British music and artist management company whose roster includes Iron Maiden and Elton John. The owners of all four of the major record companies also recently have chewed over deals to diversify into merchandise sales, concert tickets, advertising and other fields that are not part of their traditional business.

Even as the industry tries to branch out, though, there is no promise of an answer to a potentially more profound predicament: a creative drought and a corresponding lack of artists who ignite consumers’ interest in buying music. Sales of rap, which had provided the industry with a lifeboat in recent years, fell far more than the overall market last year with a drop of almost 21 percent, according to Nielsen SoundScan. (And the marquee star 50 Cent just delayed his forthcoming album, Curtis.)

There’s a lot of good reasons why the music industry is in the tank, from their sue-the-customer approach to downloading to the stagnation of radio. But don’t overlook the abundance of crappy music as a factor. I realize I’m nobody’s target demographic, but I can count on one hand the number of major-label CDs that have come out in the last year or so that have made me think “I really ought to buy that”. I may not be representative of anything, but I bet I’m not the only person who feels this way.

One more thing, on a personal note:

More than half of all music acquired by fans last year came from unpaid sources, including Internet file sharing and CD burning, according to the market research company NPD Group. The “social” ripping and burning of CDs among friends — which takes place offline and almost entirely out of reach of industry policing efforts — accounted for 37 percent of all music consumption, more than file-sharing, NPD said.

So far, I have not ripped any CD that we don’t already own. I’ve only approached one person about it, and that’s my buddy Matt, who was my roommate for many years and whose CD collection I still think of as partly mine. I have this bizarre sense of guilt about borrowing other people’s CDs to rip, which I can’t quite explain. It’s not like I didn’t borrow friends’ albums and CDs back in the day to tape them. I’m sure I’ll get over this, but it’s still weird.

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2 Comments

  1. John says:

    I’m surprised that no one ever mentions the video game industry’s increasing share of consumer entertainment dollars!

    It’s too bad they didn’t realize that CD prices have a lot to do with it. I remember when the CD first came out they said the prices would eventually drop down to match cassette and vinyl prices: they never did! LIARS!!

    A CD should not cost a consumer more than $7. Middlemen should just be removed from the picture and the business would be a lot healthier! And I agree that the best music I’ve found in recent years comes from independant labels.

    On an somewhat related note, they won’t be able to stop file-sharing, as a new breed has recently popped up: encrypted file-sharing. My company makes one such free solution, and we almost have half a million registered users (GigaTribe: http://www.gigatribe.com for more info and the actual download). The RIAA’s days of suing it’s customers are just about over!

  2. Kent from Waco says:

    Kuff…

    I agree entirely. And I think there’s another reason why the music biz is in trouble. Concerts are ridiculously unaffordable compared to what they used to be, and frankly pretty few and far between.

    25 years ago when I was a college freshman in Portland, big rock concerts were close to mandatory. As a college student I could actually afford to hop in the car with my friends and go see Springsteen, Neil Young, U2, The Who (yes they were touring then and the Clash were opening for them) and so on. I can remember more than one road trip to the Bay Area to hear the Dead. These days when you contemplate going to a concert you feel like you are just bending over and assuming the position, especially with all the additional fees that Ticketmaster applies on top of the excessive ticket prices. The big road shows cost triple what say a major league baseball ticket costs and that’s just ridiculous.

    So what happens? The youth of today are just less focused on following music and being obsessed with particular bands than we were 25 years ago.

    And then there is also the whole shift in home electronics. Back in the day the only major electronics that young people would buy was stereos. Everyone guy I knew with some extra cash would build a monster stereo system which would then require a massive vinyl and tape collection to make the investment worthwhile. These days the same kids who would have bought multi-thousand dollar stereos 25 years ago now buy overclocked computers, video game consoles, and home theater systems in which the speakers are almost an afterthought. So instead of CDs they are busy buying game cartridges and DVDs and downloading MP3s.

    I frankly think its a perfect storm for the music industry:

    –Internet, MP3s and free file exchange
    –Unbelievably crappy radio
    –The rise of an internet youth culture that is not centered on music
    –Overpriced live music
    –Shift in youth electronics culture from monster stereos to computers and home theater.