It used to be a weekly or monthly event that was looked forward to with great anticipation. Grab the wallet and jump in the van for the journey to the big city to pick up the weekly or monthly haul of new music. The year was 1995. The mp3 music file format had yet to become ubiquitous. Napster, a peer to peer file sharing site that became famous as a one stop shopping location for free music online wouldn’t appear until 1999. The iPod, which made portable mp3 music players popular would not be invented until 2001. It was a different time in the music world. Aging musicians could rely upon the earnings from the sales of their previous albums released (their back catalog) for their golden years. Those years are now gone. Many artists are fortunate if they break even on recording costs of producing an album with record sales alone. Increasingly musicians must rely upon live performances and merchandising for their income.
In 2000, U.S. consumers bought 785.1 million albums; in 2006, they bought 588.2 million (a figure that includes both CDs and downloaded albums), according to Nielsen SoundScan. In 2000, the ten top-selling albums in the U.S. sold a combined 60 million copies; in 2006, the top ten sold just 25 million. Digital sales are growing…but the new revenue sources aren’t making up for the shortfall. (Hiat and Serpick, Rolling Stone) So what is causing the decline of music sales since 2000?
Understanding the decline of music sales since 2000 is a complex subject. Although the consolidation of radio stations and the narrowing selection of music for radio playlists has contributed to a decline in music sales, the major probable causes are the conversion from analog recorded music to digital music, fewer brick and mortar record stores who exist to sell music; the rise of iTunes and Amazon Mp3 stores and their focus on selling single songs over album collections, digital piracy and the perception by online communities that recorded music should be provided free.
Once upon a time music was not available digitally. If someone wanted to listen to music they had to dig out their analog eight-track cassette, tape cassette, or vinyl record. In 1982 the compact disc format became commercially available. Compact discs featured digitally recorded versions of songs. The first artist to sell a million copies on CD was Dire Straits, with its 1985 album Brothers in Arms (Compact Disc). Even though it has been disputed endlessly by audiophiles, compact discs were believed to be a value to music listeners because they offered higher fidelity sound compared to the analog recordings. Compact discs were also considered superior than tape cassette because a listener could click instantly forward or backward to the precise track they wanted to hear without waiting for the tape spools to spin endlessly to the beginning of the next song. Unfortunately compact discs also offered another feature that few in the record industry had considered at the time: the ability to make perfect copies of their music on their home computer. Ripping copies of music from a compact disc was never very difficult and soon people discovered they could purchase blank CDs from the store and create mix CDs of their favorite music for their friends free of charge. This was not unlike making mix tapes of earlier years, but analog tapes were prone to decay over time and also lose sound quality with each copy made from them. Digital music copies theoretically do not. This was the first dent into record company profits. Soon listeners also realized they could backup their music on their computer and the need for purchasing replacement albums became obsolete. This also affected the bottom line of record retailers, because a certain percentage of sales every year were expected to be from people who would replace a worn out, but beloved vinyl record or cassette. They also hoped that a listener might choose to make an upgrade in their collection to the superior sounding digital format which was priced at a premium of $20-$30 dollars. When all of the music a listener owns is in a digital format and backed up on their computer why buy a replacement if they could simply make another copy? While these profits were lost, the song files were unfortunately not easy to share online. They were large and bandwidth availability in 1993 was far too slow. It might take hours to upload an album like Pink Floyd’s Dark Side of the Moon. Listeners needed a better way.
This difficulty of sharing music online was made easier when the mp3 file compression format came into existence around 1991. For the first time listeners could make a nearly perfect copy of a song that sounded better than analog but was only one tenth of the size of the original digital file. This further eroded the profits of record companies, and by 1997 many listeners had archived their music collections on their computers in this new mp3 file format. Diverse and disparate communities formed online to share these mp3 songs. Uploading and swapping songs was less of a chore, but it was still difficult to locate precisely a song or album that a listener might want, particularly if that artist or song was relatively unknown to the larger public. Often, the most coveted mp3 files were actually recordings of rare material or bootleg concerts that were not available for purchase anywhere at brick and mortar stores offline. This inability to purchase these rare songs legitimately offline meant a lost opportunity for record companies to earn greater profits.
In 1999 a file trading service called Napster arrived on the scene. For the first time music listeners of mp3 songs could easily discover much of the music they were looking for and trade them with other listeners who used the service, free of charge, and increasingly many did so, until the service peaked in 2000 with a user base of 26.4 million users (Napster). More record company profits were lost.
In 2000 A&M Records and other record companies sued Napster for copyright infringement. The site had become popular with college students because they were able to use the peer-to-peer network to share their music libraries with other users, free of charge. The courts ruled that Napster had indeed violated copyright and the company was shutdown in July 2001, but it didn’t seem to matter because record sales continued to decline for record companies. More concerning, the downturn in their profits had really began to accelerate.
Around this time in October 2001, Apple Inc. released the first version of their iPod, a portable media device intended to let you “carry 1000 songs in your pocket” (Hornby and Knight). In January 2001 they released iTunes, a piece of software that manages an iPod owner’s media collection. It also features the iTunes store, a place for listeners to purchase additional media for their iPod legitimately. Steve Jobs, the CEO of Apple had managed to make deals with all of the major record companies and a majority of their music catalog of songs were made available to the public in 2003. The iPod was attractive as a music player because it was easy to use and because all new songs could be purchased for a low price of 99 cents each no matter the length and all albums initially were available for the low price of $9.99, with no subscription fee. The store made the iPod attractive and by 2009 more than 220 million have been sold (iPod), and the iTunes store is now the #1 among music retailers who sell digital music. Amazon, the online retailer known initially for their book sales created the Amazon mp3 store to compete with iTunes. The Amazon mp3 store also sells songs individually but they are often priced beneath the 99 cent price that iTunes offers. Increasingly fans began to question the idea of purchasing an album of songs when they could just purchase their favorite singles from the album. This ability was not always available to the music fan when the record industry sold physical product. During that time, record companies would release a few songs from an album of songs to radio stations and record stores as singles for purchase, but if a fan wanted the remainder of the songs on the album they would be forced to pay for the whole album. The iTunes store and the Amazon Mp3 store made it possible to buy only the songs a fan wanted and that is what they began to do. This practice has led to fewer albums sales and more songs sold. The result is more transactions for the record industry but fewer profits.
The popularity of the iPod, and the iTunes store began to affect music retailers like Tower Records and Sam Goody as well, as fewer music fans felt an urge to buy a physical compact disc when they could purchase a digital copy for their player online, and therefore many began to go out of business. “About 800 music stores, including Tower’s 89 locations, closed in 2006 alone” (Smith).
Organizations such as the Electronic Freedom Foundation claim that the decline in sales has more to do with a failure by the record companies to adapt more rapidly to changing circumstances in the industry than any of the causes mentioned. Copyright attorney William Patry asserts that “The problems-such as the decline in sales of CDs and DVDs-are the result of the copyright industries’ many and considerable failures to focus on satisfying consumers’ desires as opposed to stifling those desires out of a woefully misguided view that copyright equals control and that control equals profits” (Anderson).
In light of this, the most important cause for the decline of music sales appears to be piracy. It seems oddly coincidental that the decline began when song trading online had matured and continues to decline with each passing year since. Estimates of how much revenue is lost in the U.S. music industry each year to piracy is difficult to estimate but they are believed to be in the billions of dollars (RIAA).
One thing is clear. If we don’t purchase music and if the music industry doesn’t come up with compelling ways to serve our desire for great music then piracy will continue and could become worse. The effects of this trend could mean fewer artists creating conceptual albums in favor of singles and more efforts in songwriting on “hit making” and less on creating creative challenging, and emotionally rewarding music.
Anderson, Nate. “Record labels keep blaming P2P, but its a tough sell”. ArsTechnica.com
“Compact Disc”. Wikipedia.org. November 11th, 2009.
Hornby, Tom and Dan Knight. “A History of the iPod: 2000 to 2004.” http://lowendmac.com/orchard/05/origin-of-the-ipod.html#1
“iPod.” Wikipedia.org. November 11th, 2009. http://en.wikipedia.org/wiki/IPod>
“Napster” Wikipedia.org. November 11th, 2009. http://en.wikipedia.org/wiki/Napster>
Nielsen Soundscan. http://en-us.nielsen.com/main/insights/consumer_insight/issue_16/all_was_not_doom_and>
Hiatt, Brian and Evan Serpick. “The Record Industry’s Decline”. Rolling Stone. Jun 28, 2007. http://www.rollingstone.com/news/story/15137581/the_record_industrys_decline>
Record Industry Association of America (RIAA). http://www.riaa.com http://22.214.171.124/D5664E44-B9F7-69E0-5ABD-B605F2EB6EF2.pdf>
Smith, Ethan. “A Retailing Shakeout”. The Wall Street Journal. March 21st, 2007. A1.