Introduction
Those who support music piracy often point to the fact that "unit" industry sales are up as prima facie evidence that all is right with the record business so what's the big deal about piracy?
The chart below is their "proof" and especially since it comes from the industry's trade organization, the RIAA.
The Problem With This Picture
If I were the President of a company and I came into my board of directors meeting with this chart in hand and said "hey guys, look—unit sales are way up."
And then they said, yes but over the last decade, revenues are off 42% and if we account for inflation, they're off 60% and if we compare current sales to what sales would have been assuming a modest but "normal" sales increase of a measly 3.75% per year, they're off
70%. So, you're fired!!!
Incidentally, that picture looks like this (including where things are going over the next decade if current trends hold true).
Why the Disparity?
We hate to bore you with the facts, but the disparity arises because single and ringtone sales are the unit sales that are climbing (the purple and silver parts of the bars in the top graphic). These units sell in the $1 range for singles and the $2 range for ringtones. CD sales are the unit sales that are dropping precipitously and they are generally much higher priced units (in the range of $10 to $20).
A Real World Example
Just to drive the point home, take a look at the chart below. Notice how Hewlett-Packard's stock performance relates to it's revenues (and profits). Who cares how many units it sold!!
Hurd [HP CEO] has done his share of whuppin' since he took over HP in April 2005. The company had pulled in $80 billion of revenue for the Oct. 31, 2004 fiscal year, a figure scarcely changed over the four years since the merger with Compaq Computer. For fiscal 2009 the take was $115 billion, or annualized growth of 7% over the last five years. Net income during that period has been up an average 18% per annum to $7.7 billion and jolted ahead 25% in the first fiscal quarter of 2010. All this is thanks to dramatic cost-cutting, the standardization of large-scale purchases like semiconductors—and a brutalizing culture of accountability for every penny in and out.1
Need More Convincing?
Click here for an even more in depth analysis on unit sales.
