Stop Music Theft

How Bad Is It?

While most in the recording industry know things are bad, they don't necessarily realize how massive the theft of intellectual property is. So that you are totally clear as to what we are up against, check out these startling statistics:

• The latest estimated numbers for all forms (movies, TV, music, etc.) of intellectual property theft are in the range of $22 billion per year.¹
• Estimates are that some 12,000 U.S. jobs in the recording industry have been lost due to this theft.²
• Latest figures for recorded music theft is $5 billion annually,³ (compared to recent year estimated recording industry revenues of $8.4 billion⁴).

Imagine the law enforcement reaction if $22 billion was robbed from banks every year⁵. Another way to look at this number: 397 of the S&P 500 companies gross revenue is LESS than $22 billion. Over 10 years, the magnitude of this theft would exceed the current revenues of iconic American companies like General Electric, AT&T and IBM⁶.

While there are many "excuses" and rationalizations as to why stealing "a few tracks" is "no big deal," in fact, it's a very big deal. It's killing companies and destroying the careers of artists, songwriters, recording engineers, musicians and the pantheon of support staff at labels, publishers, studios, radio, managers, publicists, and the like.

The very latest picture for 2009 is not encouraging either. Recorded music sales fell 10% more and are down 30% since 2004⁷.

While we have tended to focus more on music than other intellectual property theft on this site, the theft of software is also pandemic. Software piracy annually was recently estimated at some $29 billion!!⁸.

The Numbers: Read 'Em and Weep

Dollar Sales Analysis - US

Alright, we have looked at the picture from 30,000 feet. Let's get into specific numbers. Let's look at dollar sales data from the RIAA Recording Industry Sales database for the period 1999 through 2008. Focus on the following:

• Overall sales down 42% (despite the advent of various pay digital delivery avenues).
• CD sales down 57% over the last 10 years.

If we inflation adjust these numbers based upon the US Consumer Price Index as reported by the United States Bureau of Labor Statistics⁹, we get even more depressing numbers:

• Overall sales down 59% (despite the advent of various pay digital delivery avenues).
• CD sales down 70% over the last 10 years.

Let's consider another factor: From 1999 to 2008, the overall US GDP grew by 54%¹⁰. Against this background, is there any reason to assume that US recording industry revenues shouldn't (a) grow and (b) grow by a percentage amount somewhere in that ballpark? The question is what percentage? For this analysis, we took a look at another entertainment market. Per the MPAA, the US box office increased at an average of 3.76% from 1999 to 2008¹¹. We applied that percentage to our statistical analysis to determine the "putative" music industry sales decline¹².

We then recalculated what the key sales decline would have been in the music market had it not been decimated (in our view) by illegal downloading. Here's the key figure from all of this analysis:

• Inflation-adjusted overall recording industry sales down 70% from what it should have been assuming a healthy business.

We have seen many academic studies that argue that illegal downloading is either not really harming the music business or even is a net positive¹³. It is hard for us to imagine how any right-thinking person could look at an industry whose sales are down 70% over a decade and not see that something is obviously seriously out of whack.

Top Selling Artists Per Year Analysis (Japan)

Let's look at this from another angle: Another measure of the damage being done to the music industry is what is happening to unit sales. Specifically, how many units are the top selling artists moving and what is the trend. The chart below tells an astounding story. It is essentially a chart of platinum (1 million units or more) selling albums in Japan. Note the solid rise to 1999 and then the substantial decline. Interestingly, it just so happens that Napster, the site that really kicked off massive illegal downloading commenced operation in June 1999¹⁴. Also, take a good look at the textual detail at the end of each bar. Note the drop off not only in the number of platinum albums each year, but the decline of multi-platinum selling albums. In short, it's a train wreck.
¹⁵

#1 Selling Artists Per Year Analysis (US)

The picture in the US is much the same. The chart below shows the number of units (CDs & digital downloads) of the #1 album for each year which was sold in the United States. (It should be noted that the digital downloads of albums is included but, is a minuscule portion of these numbers. For instance, in the case of Susan Boyle's debut CD, which was the #2 selling album in the US in 2009, less than 3% of albums sold were sold as digital downloads¹⁶.)

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The point of the above chart is critical. The top selling US album (in a single year) was NSYNC's "No Strings Attached" in 2000. They moved 9.9 million units. Compare that to the best selling album of 2009—Taylor Swift's "Fearless" which moved 3.2 million units. Interestingly, the percentage decline is 67%—almost identical to the overall decline in industry sales noted above.

Top Ten Selling Artists Per Year Analysis (US)

One last look at this ugly trend: Below we graph the cumulative unit album sales (CD and digital download) from 1999 to 2009 for the top ten selling albums for each year.

Source:²⁸

However you want to dice it, the melt down in sales is massive and sickening.

• Decline in Cumulative Top-10 Unit Album Sales
  • 2009 vs 1999: -61%
  • 2009 vs 2000: -65%
  • 2008 vs 1999: -66%

If we adjust the numbers to take into consideration what the top ten artists might have or "should" have sold assuming the industry had enjoyed "normal" and "healthy" growth during the decade this sales massacre was taking place (a 3.75% compound growth rate in cumulative unit sales of the top ten selling albums), we get the following eye-popping declines:

• Decline in "Putative" Cumulative Top-10 Unit Album Sales
  • 2009 vs 1999: -71%
  • 2009 vs 2000: -74%
  • 2008 vs 1999: -74%

Finally, forgetting the percentage declines for a moment, consider the unit sales decline. The top 10 selling albums in the US should have sold some 81 million albums in 2009, rather than the 21 million they actually sold.

The table below shows the top ten for the years 2000 and 2009 only. It even more powerfully illustrates what has happened to album sales in a decade (and remember, it, like all the rest of this data, includes the de minimus digital album sales).

What does this data tell us? In addition to the absolute cumulative unit sales decline, it tells us this: If you are a top-selling artist in today's world, the best you can hope for is to sell about one third what you would have sold if your career had merely happened a decade earlier. What a travesty.

Multi-Platinum Analysis

The life blood of major labels is the big artists that have multi-platinum albums. Their success pays for all the A&R "mistakes" the label makes (acts they sign that don't sell well).

In addition to the two thirds melt down in unit sales of top albums now versus a decade ago, today's artists have no hope of ever scaling the heights of their predecessors.

Let's look at the data. The following table presents the top selling albums of all time per the RIAA.

Notice that not a single album was released past 1999—the year Napster was born. If we take a close look at the release dates, here's what we find:

• 1 From the Sixties
• 10 From the Seventies
• 6 From the Eighties
• 8 From the Nineties

Statistical Analysis Conclusion - the Bataan Death March

We are starting to run out of adjectives to describe how bad things are in the music business so we will turn to allegory. What is happening in the music business reminds us of the Bataan Death March²⁹.

What is causing this sales meltdown? That's the subject of Part II of this analysis and you can find it at our "Who Screwed The Pooch?" page.