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Where Have All the CDsGone?
The record industry blames piracy and downloadingfor sagging sales — here's the whole story.
 James K. Willcox 
 
June 2003
New Kids in Town
The RIAA could be ignoring other factors that are having anegative effect on CD sales. Bernoff argues that growingcompetition from other forms of entertainment, such as DVDplayers and videogames, and the consolidation of radio-stationownership are having a much more deleterious effect on salesthan downloads. For example, people in the U.S. spent almost $7billion on video and computer games in 2002, and more thanone-third of all U.S. homes now have a DVD player. Given thatthe price difference between many top-selling CDs and DVDs is just a few dollars, it’s not hard to imagine many people opting fora sexier, newer format that offers not just music, but a movie inmultiple formats that can include directors’ cuts, commentaries,and other bonuses.Perhaps even more significant, the consolidation in radio hasresulted in Clear Channel Communications controlling 60% of therock radio stations in the U.S. That means listeners are exposedto more homogenized playlists, so fewer artists get exposure,and listeners hear a narrower selection of songs. Also, radiopromotion — where labels pay promoters to get stations to playcertain songs — has become too expensive for all but the majorlabels. As a result, mainstream radio rarely plays music fromemerging artists signed to small or midsize labels. Even MTVplays fewer and fewer music videos. So people are turning to theInternet as the primary medium through which they can discover— and perhaps buy — new music.Also, consolidation in the music industry, where four of the fivemajor labels are owned by large public corporations, hasincreased the pressure on music divisions to make “hit” recordsto meet quarterly earnings expectations. This has resulted in thelabels signing fewer bands, paring rosters and staffs, and takingfewer marketing risks. If a new artist’s album doesn’t generateexcitement quickly, the label will shift its resources to another
 
project. While many of these artists eventually move to smallerindependent labels, these labels tend to lack the money andmarketing muscle to generate huge sales numbers and often lacktop-shelf distribution and international sales. The result is lowersales for many artists. Consolidation has also contributed to themajors releasing fewer CD titles over the past few years.
Click for "The Big Picture" graphic sidebar.
Too Little, Too Late?
The RIAA also claims that downloads take money out of musicians’ pockets. But thanks to high-profile suits filed byartists like the Dixie Chicks and Incubus against their labels, fansare becoming aware of record-industry contracts and accountingpolicies that result in few artists ever making much money fromthe sale of their music. This might lead to fans feeling less guiltyabout “stealing” music.The record industry acknowledges that less than 10% of itsartists will “recoup,” or make back, the advances they’re givenwhen they sign a recording contract. In fact, rather than worryingabout lost sales, many artists view the Internet as their lifeline toattracting new fans. In a recent opinion piece for the
Los AngelesTimes
, Janis Ian, an outspoken proponent of downloading, saidthat in the six months she’s been offering free downloads of hersongs on her Web site, “Thousands of people have downloadedmy music . . . and they’re not trying to steal. They’re just lookingfor music they can no longer find on the tight playlists of theirlocal radio stations. That’s how new artists gain listeners thesedays — through the Internet.” That the labels have been painfully slow to adapt to the Internetand the new ways people want to receive music could also behurting sales. If they want people to migrate from freedownloads to paid services, they have to offer subscriptionservices that can not only compete, but add incremental value.There are plenty of examples — from cable TV to bottled water— of people paying for services or items they can get for free.But the labels still seem mired in control issues, which hasresulted in lawsuits, draconian legislative initiatives that trampleon people’s fair-use rights, and threats of invasive actions againstthe very people who buy their product.All of this chest-beating and bullying by the labels has generatedlots of ill will. Until recently, hardly anyone even knew what theRIAA was — today, its Web site is hacked and shut down aboutonce a month. When the labels finally launched online ventures,they completely missed the mark with limited catalogs andrestrictive digital rights-management schemes that impeded orprevented the things people want to do most: make CDcompilations and transfer music to portable MP3 players. Morerecent online services such as MusicNet and Press
 play 
are stepsin the right direction, but they have to go farther — with thingslike more attractive pricing and deeper catalogs — to competewith free services.For instance, the average price of a download is 99¢ a track, sodownloading an 18-track CD song by song comes to about $18.While this is only slightly more than the average price of a CD,you’re getting compressed audio and no packaging, and you haveto devote time and effort to downloading the music.
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