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FEBRUARY 13, 2003

COMMENTARY
By Jane Black

Big Music's Broken Record
The recording industry keeps repeating that file-sharing is ruining CD sales. If it looked for some other reasons, it would find lots of them


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It's the busy season for number-crunchers at the Recording Industry Association of America (RIAA). By the end of February, the industry trade association will release new statistics on what it says is a dizzying two-year decline in CD sales. The latest figures, from the first six months of 2002, show a 7.2% slide in CD sales from 397 million to 369 million. Revenues fell 5.1%, to $5.2 billion. Full-year sales for 2002 are said to be just as dismal -- if not worse.


Piracy is the drumbeat pulsing beneath the music industry's blues, the RIAA says. After all, CD sales defied gravity and rose during the last three recessions. It wasn't until Napster and other Internet file-sharing services such as KaZaA took off that sales began to dip. Says an RIAA spokesman: "In our view, piracy is the primary reason for the decline in sales."

Not everyone agrees. In fact, some even hold the view that the RIAA is presenting a misleading view of CD sales trends to bolster its ongoing war against copyrighted-music pirates. And the RIAA's numbers have been convincing to more than a few policymakers in the U.S. and Canada, leading to what many consider draconian and unfair proposals, regulations, and taxes for people who burn music onto CDs.

LESS STICKY STUFF.  Now, George Ziemann is striking back. Ziemann, a musician and the owner of MacWizards Music, a Tempe (Ariz.) music production company, posted an article, "RIAA Statistics Don't Add Up To Piracy", on his Web site on Dec. 11. In it, he claims that one reason sales might be down is that the industry released 27,000 new titles in 2001, according to a speech made by an RIAA official, a 25% drop from the high of 38,900 in 1999.

The RIAA disputes Ziemann's analysis, saying it hasn't released an official tally of annual new releases since 1999. Industry-research firm Nielsen SoundScan has run the numbers, however, and the RIAA doesn't dispute its findings. According to SoundScan, new releases in 2001 totaled around 31,734, still a 20.3% drop.

Releases rose to 33,443 in 2002, but that's still 14% below the 1999 record. "The music industry's [modus operandi] is to throw things against the wall and see what sticks," says Nathan Brackett, senior editor at Rolling Stone. "If they're throwing 20% less stuff out there, there's less chance something will stick."

PUMP UP THE VOLUME.  Ziemann's case is bolstered when you factor in CD price increases. From 1999 to 2001, the average price of a CD rose 7.2%, from $13.04 to $14.19, at a time when consumer inflation was virtually flat. What has really happened is that the record industry has drastically reduced inventory and raised prices. The result: Sales have slipped a few percentage points. Not all that bad in a beaten-down economy.

The music industry's decline also coincides with the rise of new, compelling forms of entertainment, including DVDs, video games, and, of course, the Internet. Suddenly, the music industry has stiff competition for Americans' entertainment dollar.

At the end of 2002, 35% of U.S. homes had a DVD player, up from zero just three years ago. And DVDs seem cheap by comparison: The soundtrack to the film High Fidelity has a list price of $18.98. You could get the whole movie for $19.99. According to Nielsen VideoScan figures published in the DVDinsider newsletter, DVD sales for the week ending Jan. 26 were 4.4 million, up 1 million, or 23%, over last year. Sales over the last 12 months totaled 22.1 million, up 6.4 million, or 29%, over the previous year.

BETWEEN FADS.  Finally, there's the question of whether the industry reflects popular taste. At the height of the economic bubble, the labels made millions off the bubblegum music craze. In 2000, pop queen Britney Spears alone sold 7.89 million albums. And that earned her the No. 3 spot on the charts, after rapper Eminem, and her then-boyfriend Justin Timberlake's group, 'NSync, which sold 9.93 million albums. In 2002, Michael Jackson's Invincible "bombed," selling only 2 million copies. "The industry hasn't yet found anything new to catch the public's imagination," says Rolling Stone's Brackett.

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