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RIAA Loss Report Contradicts Nielsen Sales Record
DerekAtLC writes "In a not-so-surprising twist of the tables, RIAA reporting of 'losses' is a little bit off. An interesting blurb at Ars Technica referencing a Kensei News article points out that Nielsen's Soundscan (Which tracks retail point-of-sale numbers for the music industry) shows a 10% increase in sales from Q1 2003 to Q1 2004. The RIAA has recently reported drops in revenue from last year, citing online piracy as the main problem. The crux of the issue? The RIAA hasn't been talking about sales or revenue in terms of sales to consumers or money generated via those sales. The RIAA talks about losses in terms of number of units shipped to retail outlets. The article points out plenty of problems with this (and reasons why we are seeing the trend), but it is fairly obvious that the RIAA is not reporting the most 'useful' numbers to the public."
Another interesting thing has happened over the last few years. The growth of mega-chains such as Best Buy plus the .com's joining into the marketplace have knocked mom and pop record stores out of existance.
Less stores selling music means not only are stores keeping smaller inventories, but some store inventories fell to zero as they left the business. There's just plain less "unsold" disks sitting in the system.
Soundscan would also count an "unsigned artist's" CD just the same as any other because it went through the cash register... but the RIAA's stat doesn't include CDs sold by companies that aren't members of their group.
The RIAA represents most of the recording industry, but not all of it. Sales going down for the RIAA members does not always equate to sales going down for the industry...
You've got to make sure you know what a stat was really counting before you make conclusions based on it.
This trend is commonplace everywhere. Retail outlets don't want things sitting on their shelves for two reasons: First, because they have to PAY for them and second if they don't sell, they have to PAY to ship them back.
What the record stores are doing has been done for years in most other retail outlets. It's called "Just in Time" inventory. For example, a grocery store tries to predict how much lettuce they'll sell and only buys that much, lest they get stuck with rotting produce. McDonald's made a science of this back in the '90's.
Now, the RIAA wants to use this new inventory trend to SPREAD THEIR LIES! It shows just how dirty rotten to the core they are! They KNOW what's going on; they're cherry picking stastics to LIE!!
Of course the RIAA is going to fudge the numbers. If word got out that they were *GASP* not losing money, or at least not as much as they lead people to believe, it would make it oh-so-harder to justify their legal pursuit of grannies and pre-teens to the general public. As it is, it's a game of "oh look at us, we're the poor RIAA, we are making so much more money in a week than you poor consumers will ever make in our lives, but it's not as much as it used to be... we used to make more in a DAY than you would make in your entire life! Take pity on us, and understand why we are fucking the artists, and giving them pennies for every CD sold, so that we can afford limousines and caviar for our poor underfed kitties!". And the consumers eat it up, as evidenced by the ill-informed dolts saying things like "duh, anybody who downloads music off the internet is a thief". The RIAA makes it so that even if you download music that you're ALLOWED to (like Indy) it has a stigma associated with it. It's not about protecting "the artists", or the IP, it's about ensuring their lifestyle. They're thieves too, but in a way that is so much worse than average Joe Public who jumps on Kazaa or SoulSeek to download the new Creed/Eminem/[insert shitty pop band here] song-- Joe Public downloads the song because he likes or loves music, the RIAA and MPAA'ers of the world do what they do because they are money hungry fucks who will do anything they can to maintain their dominance.
I'm not a religious person, and I normally don't resort to Biblical citations, but I think this one applies:
"The love of money is the root of all evil." (also one of the most misquoted passages in the Bible just for the record).
On the reverse side, piracy is not the ideal situation either. I am a musician, and I hope someday to make a living off my music, but I know it won't be with a record deal-- and I sure as hell know it probably won't be from selling records. Hopefully by the time I am ready to try my music as a full time career we'll have something a bit more established that will allow truly independent music distribution, with a vehicle that guarantees the artist will at least see some money for their hard work.
Dan
Just like driving a car:
(D) to go forward
(R) to go backward
I believe the word you were searching for was "honest", not "useful".
Then again, this is peanuts compared to Hollywood which manages to make it look like every single movie looses (or makes very little) money so they don't have to pay taxes or pay people who are supposed to get a cut of the profits.
Of course, most of corporate america does exactly the same thing, which is why they've gone from a 52% tax share (versus individuals) to under 5% in 50 years.
Please help metamoderate.
Ahh, statistics are wonderful things, aren't they?
Reminds me of a couple of classic quotes about statistics:
Aaron Levenstein once said "Statistics are like bikinis; What they reveal is suggestive, but what they conceal is vital."
and Thomas Carlyle once said, "A witty statesman said, you might prove anything by figures."
The thing is, I dislike the RIAA quite vocally, but I'd still probably believe them if they said their revenue is down. But the first thing they teach you about statistics in math is that "Correlation does not equal causation."
They have the right to fight piracy. They DON'T have the right to use wildly missleading numbers to convince the government to help them prop up their failing business model.
Comment forecast: Bits of genius surrounded by a sea of mediocrity.
I am somewhat reminded of a post regarding the appraisal of the Asian software market, and some of the ways the BSA calculates losses. From what I remember, it went something like this:
If Autocad Super Deluxe Enterprise Edition costs $10,000, and 100 Chinese children install it on their home PC, it obviously cost the industry One Million Dollars!
Same difference. If the RIAA stopped being a bunch of whiners and offered a P2P service for $10/mo, they would make SO much money. $120/year is MUCH MUCH more than I spend on CDs in a year. Unfortunately, some organizations are too set in their ways such that they wouldn't know opportunity if it threw a suitcase of money at them.
- fake products -- scam artists shipping stuff to stores that RIIA membership doesn't know about -- but good enough to fool consumers (haven't heard of this running rampant).
- Less spoilage (shipping fewer, selling more, returning way less). Better profits all the way 'round. Works for stores, artists get more money, so does the RIAA.
- RIAA scam (they tell artists "140M records", but they sell 160M) -- but the RIAA wouldn't do that would they???
Note that, in all possible circumstances, record sales are up.Only in (1) would the RIAA (and artists) actually get less money, but that's not the fault of the "pirate scum" 12 year olds that the RIAA insists on suing. If this is the case, then the RIAA needs to start going after the real pirates, and stop suing kids.
For (3), The artists are getting less money, but that would be because the RIAA is scamming on both ends (cheating artists, raising prices, suing customers). It'd take a public scandal to fix that.
Free Software: Like love, it grows best when given away.
> Another interesting thing has happened over the last few years. The growth of mega-chains such as Best Buy plus the .com's joining into the marketplace have knocked mom and pop record stores out of existance.
Excellent point. But it goes further than you suggest.
It is much easier for a mega-store to predict its sales, and manage its inventory efficiently, than it is for a small store.
For example, a small store might receive shipments once a week, or even once a month. For a given CD, that store might expect to sell just two copies before the next shipment, but a week or a month is a long time to be sold out of something, so that store will want to stock three, or more likely four copies of that CD. That's 50% excess inventory on average. Plus, there is nothing the small store can do with that excess except to return it with the next delivery truck.
But a mega-store will receive shipments every day. Plus, the mega-store might expect to sell 5 copies per day of that same CD. So let's say the mega-store keeps 10 copies of that CD on the shelf, with re-orders every day, and ends up returning the excess 5 copies at the end of a month. But that's 5 copies returned on a month's sales of 150 copies, which, in the long run, only represents an excess inventory of 3%.
And let's not forget the mega-stores' other advantages for efficient inventory management, including computerized check-outs, and the ability to move inventory around from one store to another.
So it shouldn't surprise us if excess CD shipments have been drastically reduced.
I can see another way in which Internet Radio, and music downloads would lead to more efficient sales. Today's buyer will go the the record store with better knowledge of what he/she likes and wants. Thus, that buyer will be less likely to pick up the mass-marketed Britney Spears CD, and more likely to pick up some lesser known band. It's not worth it to the record store to stock extra boxes of a small band's CD, the way they would with a Britney Spears CD. Plus, it's less likely for there to be a sudden rush on that small band. Thus, the trend is away from the mass-marketed items, where it's worth it to be wasteful (and necessary, to meet the peaks), and toward more highly focussed items, which sell a few at a time. And let's not forget the increase in the almost-100%-efficient special order sales.
As to the drop in international sales, I think that is more likely to be a shift away from the heavily-advertised American groups, and toward the less-advertised local groups in each country. Once again, Internet Radio and downloads would allow listeners in each country to discover those other groups, rather than simply being led by U.S. advertising. I assume that many, if not most of those smaller groups' sales in other countries are _not_ measured by the RIAA.
The alternative is to account for the loss, like everyone else does, rather than attempting to mock up some elusive misdirected profit figure. For example:
I make a product; let's say it's a limited edition Newt Gingrich action figure. It costs me $2 worth of materials and I pay various employees about $1 worth of labor per item. Figure another buck in there for distribution costs. I sell these items for $28.50.
Now someone steals one of these little items. What have I lost? By normal accounting, approximately four bucks. By the RIAAs accounting, $28.50. Sure, $28.50 is what they list for, but does that mean that if I decide to list them for $285 each that my loss per item is now ten times as much, even though no one is buying them at that price? This is like those adds which throw in several free items and claim "A four hundred dollar value, only $19.95.". The only legitimate way to account for loss is by demonstrating what the item cost, not what you are asking for it. In fact, such accounting is circular, since the list price of a product invariably includes a markup to account for losses due to shoplifting.
Now, let's take this one step further. Someone sees one of my action figures in the store and, since they cannot afford one, goes home, looks at one the neighbor just bought and makes one which looks just like it. (My grandmother did this with Cabbage Patch Kids while I was growing up. She would make them for the kids whose parents could not buy them.) Now how much has the manufacturer lost? By any normal accounting, absolutely nothing: no materials, no labor, no distribution costs.
If this is done on a massive scale, then some loss of market can be alleged. On the other hand, most of the loss is not caused by the "theft", but by the fact that the manufacturer priced themselves out of a market. If those action figures where sold for $6 (a healthy 50% margin), someone would probably not waste time trying to duplicate it. My grandmother would not be making cottage industry Cabbage Patch Kids if they had sold for $10 apiece instead of $150+. This scenario only occurs when the price of an item is totally out of line with what it really costs to make the item.
Now, the unfortunate part of this, is that people should respond by supporting local, independent artists instead of copying RIAA distributed music. That may be, but you should recall that the RIAA has worked very hard to squash the distribution of anything they don't control. I happen to know a bunch of small-time musicians and performers and personally, I would rather support them then copy the crap that the RIAA publishes and, personally, I do. But, just like kids getting tormented in school for not having a Cabbage Patch Kid (and kids can be vicious, it is hard, even as adults, to not be mainstream and listen to mainstream things. The various cartels have made mainstream music and movies a requirement for participating in modern culture. If you don't have it, you aren't with it, you can wait outside.