Summary
The sales of recorded music have fallen recently. Many articles have been written and statements
made about whether this decline is due to the downloading of MP3 files. The claim has been made that
MP3 downloading, if unchecked, would destroy the recording industry, a claim I term the “annihilation
hypothesis”.
Unfortunately, much of the analysis appears to be little more than looking at the most
rudimentary of numbers and then using one’s favorite hypothesis to explain them. There are partisans
on both sides trying to spin the numbers to fit their message. Most of the claims that I have seen are
often unsubstantiated and sometimes are based on the use of different definitions.
In the following report I look at 30 years of record sales to try to determine what have been the
most important influences on record sales. I then use this information to examine what has happened in
the market recently to try to determine whether there is evidence that MP3s have caused harm and how
large that harm might be. My conclusions, which tend to change as new data come in, are currently as
follows:
1) Record sales have had four prior declines in the last thirty years, and the decline as of 2001 does
not appear different in character than the other declines.
2) Preliminary reports on mid-year record sales for 2002 indicate a more pronounced decline in
sales that now appears to make the current dip larger than previous dips. This new data adds
support to the claim that MP3 downloads are causing harm to the recording industry.
3) Income does not appear to be an important factor in record sales changes during the last 30
years. Therefore the current recession does not appear to be responsible for the current decline,
contrary to my previous expectations.
4) Sales of singles have been falling almost continuously for the last thirty years. The continuing
impact of their decline, therefore, should probably be removed from overall record sales, which
diminishes somewhat the severity of the current downturn.
5) Inflation adjusted list prices fell during the 1970s but have remained almost constant for the last
twenty years. Increased sales by discounters has probably slightly lowered the price paid by
consumers. Price does not seem to play a role in record sales fluctuations.
6) Unit sales per capita have risen substantially over the last 30 years. The main reason for this
appears to be that listening to recorded music can be done in more locations. Additional uses
for recorded music became available in the automobile and, particularly in the 1980s, in
activities amenable to portable ‘walkman’ type devices.
7) The factors that led to growth in unit sales appear to have ended in the mid 1990s. Cassette sales
have been dropping to zero and some of the recent decline in overall sales is due to this decline
in cassettes.
8) My current, very rough, estimate is that if MP3 downloads continue unabated, that unit sales
will drop somewhat more next year and then begin to level off, with an overall decline of about
20% that would be caused by MP3 downloads.
Like all things in life there are peaks and valleys. I've been using a PC since '96. And I can't remember once any software purchases I made that I was statisfied with. I was alway's left with a feeling of being ripped off. I am of the judgement that any thing that I buy I should have the right to do with as I please, whether its buying a modchip for my PS2 box, or backing up my bought DVD's, music cd's etc. Any attempt to prevent me from doing so is un-american.
All those in the industry that continue to cry wolf about how much money they are losing from illegally copied software, i.e., Micro$oft, but yet continuously post positive sales. And I don't mean those that would seek to profit from such copies, but the individual who just whats to buy a reliable piece of software, or music for a fair price.
If you think about it just examine about how much more media you get for your dollar in a DVD movie vs a music cd and yet they cost roughly the same. The music industry has and always will be the pirates of the entertainment industry.