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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."
I'm sure you know ever really getting hard numbers on piracy is impossible just because the nature of the industry and who would really buy something if they couldn't get it for free.
Honestly the responce to it? I think they should embrace and encourage, maybe give a biz model similar to what Napster was pushing for. A distributed model (sign the music so you know it isn't tampered with) that will is a premium up and above the free realm stuff like kazaa. That way people still get their free stuff, the music companies get a shit load of revenue without much effort on their part and everyone is a little happy.
Of course they want to have absolute power over their product, think of the profit that could be made if they could control it no matter what. Or if they could do a pay to play model(pay per view), or if they could figure out a way to pull a microsoft in that they have a limited seat license that only one or 2, etc people could watch that copy of the movie at one time. That is a gold mine in their eyes and will be what they go for. Is it right...? No, but do they want it? Yes.
Piracy, P2P, and etc are just the latest buzz words for them to try and get what they can. Remember a couple of years ago how piracy was akin to supporting terroism, it is just getting more attention from you and I because it is now in a field that is affecting us more as techies.
Sales are down for the RIAA... they're considering a CD sold at the point when they get paid for it, the point that it lands in the warehouse of a store chain, not the point at which it lands in a consumer's hands which is where Soundscan sets up its counting points.
The fact that store shelves are holding less in inventory is bad for them, but isn't exactly a sign of piracy, just a sign that the RIAA's business model is becoming dated.
I'm pretty sure that the major chains such as Wal-Mart and Best Buy would love to have a small CD factory in the back of each store in which they could print the discs and surrounding paperwork on a just-in-time basis. Afterall, both the music and liner notes could be available to the store over a digital network. Why ship physical packages that might not sell when you can just ship blank disks and figure out what to put on them later?
Bottom line, it's going to get worse for the RIAA. They profit from the wastes in the system, and the system just keeps getting better at not buying things that can't be sold to consumers...
Like other people have mentioned, record stores have been getting out of the business left and right. Either they've been closing, or switching over to more mixed media stores. The big boxes don't order huge inventories, especially of back catalog items, and smaller stores have been switching to other media types (DVDs and games mostly, very lucrative and growing markets)
So is this due to piracy?
Err..no.
Sales of the hit new music has remained pretty constant (which is expectable in a mostly stable marketplace), which are often the most easy to download, so it makes it obvious that something else is at play here...
Maybe it could be the MASSIVE growth of used media stores that have been popping up all over the place?
So what can be done about that? It's obviously legal, and easy to say that it's ethical to do, after all, we do have the right to sell what we have paid for...
My suggestion for the RIAA is to actually lay off the worrying about piracy, and instead, run an information and advertising campaign informing consumers about how when they buy a used CD, they are in fact ripping off their favorite artist. By changing the focus, and acting through education and not litigation they can regain some respectability, especially if they make a good argument for it.
I agree. The way the RIAA calculates sales, by the "number of units shipped to retail outlets," is very flawed. I'm sure all those purchases I've made through emusic, the iTunes Music Store, DMusic, and CD Baby haven't been included into their [RIAA] numbers.
This leads me to believe that music sales are actually up worldwide. Until *all* music sales are calculated (from digital downloads and independent/non-RIAA CDs to RIAA member CDs), I don't think we'll really know for sure what the sales numbers are like.
The fact is that the RIAA members had a near monopoly on the means of distribution until the last few (perhaps as few as 2) years. What is really going on is musicians are taking back control of distribution. Just about every established band in my town has a cd. You can buy them at shows, or from web sites like CD BABY, or even from independent record stores run by people who care about music and musicians rather than just shoveling product.
This is good for musicians but more importantly its important for listeners because as a result a lot of styles, both historical and regional, can once again be heard.
But the RIAA is in trouble because their business model is no longer valid - that business model was to extract monopoly rents (to use the economists jargon) from the distribution system.
Given that their technology based initiatives will be useless against organized piracy who already operate outside the law one can only assume their real objective is to regain monopoly control of the distribution channel. To do that they would have to mandate equipment that could only play media licensed by their members, and I don't think anything passed so far is that draconian.
Squirrel!
In other words, the geek boycott of RIAA labels is failing. I don't really see this as good news.
You see? You see? Your stupid minds! Stupid! Stupid!
1.) Announce a wholesale price hike, causing retailers to stock up on inventory, and purchase less the following year
2.) Attribute "fewer sales" to P2P
3.) Sue the butts off of "pirates"
4.) Appeal to the public as being truly hurt by these individuals, while extorting money from defenseless individuals who couldn't afford music in the first place
5.) ???
6.) Profit!!!
Note: By "pirates", I am referring to individuals who share music they MAY indeed own yet are "breaking the law" by doing so.
I don't say piracy is right or wrong. For those who can afford licensed media yet pirate, shame on them! For those who are concerned with the cost of living - I can't blame them. The RIAA isn't any better than the "pirates" they sue, as long as they employ dubious tactics.
Since most of the "losses" come not from file traders but from those who copy the full disc, including the liner notes and sells those on the street and even to music stores.
The RIAA once reported one in six discs that you buy is a pirate disc. This is where they are truly losing money. However if all this contrary information were to make it to the courts that are granting the search warrants for ISP's then it would be that much hard for the RIAA to get those warrants....and that would prevent them from getting the easy money from going after file traders.
Speaking of this easy money, has anyone seen the figures of how much the RIAA has brought in from these Nazi tactics and how much of that total was reimbursed to the artists who lost sales? Also how does the RIAA determine who has been pirated and how are the reimbursed? If someone were to bring these point up to the judge who is issuing warrants then the RIAA might really have to do something more than whine to get a warrant.
Not true. Hypothetical example: I'll grab a copy of the latest Creed album (insert favorite over-hyped band here) if it's free and yeah, maybe I'll listen to it once or twice, but it's not worth it to me to pay $17.99, $15.99 or even $12.99 to be able to listen to it. So no, not every download is a lost sale. It's just basic economics:
There are 2 ways to get music, buy and and steal it (and please no diatribe on whether steal is the right word).
OK, you *know* it's the wrong word, and yet you use it anyway? You sir, are being an industry shill.
So if you stole it, it should be considered a lost sale, as you obviously wanted the music but chose to steal it instead of buying it.
A "lost sale" is someone stealing a CD off the counter, or even a customer walking out without buying anything because the clerk pissed them off - but we are talking about copying from media that has alrady been bought, not the theft of a product. It's a subtle difference that business doesn't like to acknowledge because all they see is dollars that they didn't get. It's like NOS getting pissy abuot "lost sales" when people build a DIY nitrous system for their car. Sure, they didn't sell a kit to someone who was interested in their stuff, but if the price was closer to the reproduction cost + hassle of DIY, they probably would have. Not being competitive in the market place is the reason they "lose" sales like this, plain and simple.
Once again, it's not a lost sale if you weren't going to get it anyway. I'm interested in lots of music, but I'm not going to buy a $32 NZD industry backed CD because they are a complete rip-off (I also don't download MP3s either). Having said that, I bought a $5 NZD CD of driving music from the gas station last night. Pricing is a key issue - they'll bleat about the cost of producing new music, but if the industry wasn't snorting their profits and spent less playing at being rock stars prices would be more realistic.
And BTW, the same retail vs wholesale thing is the reason (pop star|idol) tops the charts the week of release - nobody bought it except the stores, but the punters see it in the charts and buy it 'cos a) it *must* be good if it's in the charts, b) it's advertised everywhere so it's all they know. The music recording industry is a joke - go down to the pub this weekend and supprt your local bands instead.
Forget thrust, drag, lift and weight. Airplanes fly because of money.
Isn't this the opposite of capitalism?
For years, I had to go to run down stores with poor customer service and no inventory. Now, I can order online.
Why would we want to go backwards? Aren't we supposed to evolve? If you want your mom and pop store to succeed, shouldn't you be searching for a niche/market in which you excel? Do you think the world really owes your mom and pop store a favor?
I don't think so. I hate *most* mom and pop stores. Too many salesmen, too many commissions. Too little inventory, too poor customer service. Too high prices, too many just grunge music fans.
When I buy online, I hear reviews from people that listen to MY music. Not yours, I'm not limited to some little twat that only listens to such and such music.
Note to moderators - This post is objective.
Wal-Mart is renowned for forcing it's suppliers to radically revamp their operations to meet Wal-Mart's needs. Wal-Mart dictates to it's suppliers, demanding just-in-time inventory control and annual - if not quarterly - wholesale price drops. 20% of CD and DVD retail dollars now flow through Wal-Mart. With that kind of buying pull, recorded music became yet another consumer item that Wal-Mart could live without, but that couldn't live without Wal-Mart. If we go with the theory that Sam Walton's boys popped the RIAA's cherry during the buyer's renegotiations, that probably provided leverage for other retailers from Kmart to Tower Records to cut the same deal, especially during a down economy.
I wouldn't be surprised to find that the gusto with which the music industry tries to squeeze more blood out of consumers by lobbying Washington and other capitals was in direct relation to how much of they're getting squeezed in Bentonville, AR.
Luke, help me take this mask off
There is one severe problem with your reasoning here: you only account for variable costs, i.e. the marginal amount spent per item produced; you completely ignore fixed costs, which must be amortized over all items sold. For your examples, most of the cost is variable cost, so the impact of a small number of thefts on fixed cost can essentially be ignored. In the case of music or video recordings or software, variable costs are miniscule, but up-front fixed costs are huge. So the marginal cost to the producer of a CD in a box or a pirated copy is almost the same, but the former can act as a vehicle to amortize fixed costs, while the latter cannot. How does your model take this into account?
THE NERD IS THE COMPUTER.
on a shared cab ride 2 days ago, and we got to talking about P2P, so I slyly asked her if perhaps they had considered that "maybe DVDs, game consoles, cell phones, and gameboys may be competing for entertainment dollars?"
"NO, Absolutely not - its P2P, the children don't understand and need to be educated. Those other explanations are nonsense." she said
I said "hmmm, well are you sure, cause it..."
"Yes we are absolutely sure. These P2P programs are set up to steal and kids don't realize what they are doing it wrong. Its silly and inexcusable, we need to change their attitude."
So you see - they don't CARE to see any facts or evidence that point away from their view. They don't WANT to hear it. And this not wanting or caring will re-enforce their current behavior patterns. It will also cloud their minds such that EVERY way they approach the problem will have P2P destruction or absolute control in mind.
What they DO understand that "war does not determine who is right, war determines who is left".
Is the juice worth the sqeeze?
Too many salesmen, too many commissions. Too little inventory, too poor customer service. Too high prices, too many just grunge music fans.
Uh, isn't that most huge chains? And what customer service are you referring to from any online store? Customer service to them is tracking your order. Let's take music stores for example.
Killer mom-and-pop stores still exist ESPECIALLY in record sales; in big cities (like Chicago) where the music scene is all about a well stocked record store, it's MUCH preferred over a chain. You walk into the store, hum a few lines, and it can be pretty damn impressive when the guy behind the counter a) knows who you are and b) can name the tune immediately. Not to mention the fact that they know what you like and drop you tidbits about what's coming out, and if you like certain bands, that you'll like certain OTHER bands, on top of which, special ordering is sooo painless most of the time. They also more often than not have a pulse on what's going on locally. And where do you get this limited selection bs?? I find MORE stuff at my local record store (and not even the obscure and/or local stuff) down the street, along with a whole slew of imports. Half the time I can't find the exact stuff I want online, like a very specific concerto recording (almost always easily found by my fave classical music place) or that Jawbreaker import that has been out of print forever.
Now don't get me wrong; I also love places like amazon when I know exactly what I want... but no internet store is going to take the place of stopping in at Reckless and chatting (or arguing!) with the music geeks on both sides of the counter about the newest album releases, etc etc.
I have read through the posts so far, and a considerble number of the posts made on the subject before and a lot of the analogies come close, but don't hit the heart of it for me.
Here is the way it is for me.
Many years ago (I don't know how many - google it yourself if you're interested), Natalie Imbruglia came out with a song called Torn. I have listened to this song so many times I can almost repeat every note she sings, AND every note the rest of the band plays.
This song ranks among my top 10 all-time favorite songs. It fucking gives me goose bumps on occasion when I listen to it, just because of the way she uses her voice. On the basis of this one song, I am ready to claim that she has a vocal talent worthy of note (even if....(see rest of post)).
So, when all these p2p networks started springing up, I checked into them, in the interest of deciding which CD's would be worthy of MY hard earned dollars. Natalie was my first test case.
My purpose for this was not to download mp3's (at least in the final stage). I happen to like a lot of music where even the tinniest ear can detect the difference between formats. I certainly can. My purpose (as far as Natilie was concerned) was to see if there was enough of her other stuff I liked to purchase a CD of hers. This was the first time I used a P2P network. (I get my porn elsewhere.....tttthhhhhuuuuuppppppttttt).
Not a chance (so far..... I understand she is working on a third alblum).
She seems to be techno-pop, a genre I'm not all that interested in, but I downloaded all of the songs off of the two released CD's I could find of her for sampling.
Conclusion: I still think Torn may be one of the best songs ever written - as it was performed by Natalie. One of these days I will get around to seeing if she wrote it, or it was done by committee and she was only the performing artist. It doesn't really matter to me.
BECAUSE: I found (so far at least) that this is the only song of hers I like. I don't know if the one song was in line with her normal fare and I just can't appreciate the rest of her music - or this is a fluke and the only good song she did.
For the purpose of discussion, it doesn't really matter. What mattered to me was with the availabilty of downloadable mp3's, I SAVED at least 20 dollars because I didn't buy either of her CD's for ONE FUCKING SONG.
I've got more than a few years in me still but I ain't exactly young. Like many, over those years I have purchased LP's, 8-tracks, and cassettes of whole alblums because there was one or two songs on it I liked.
Those days ended long ago.
(okay, about 1975, when I had to start earning my own money).
In the last five years I have purchased two CD's. Alice Cooper - Welcome to My Nightmare, and Black Sabbath - We Sold our Soul for Rock and Roll. As you can see, Natalie isn't exactly my normal fare. For these two CD's I payed what I considered to be an equitable price. $7.99 and $5.99 respectively.
So maybe the RIAA counts the two Natalie Imbruglia CD's as lost sales, because I didn't buy at that time without listening to them first. If so, well.... everyone else has expressed an opinion on this many times that pretty much coincides with mine, but maybe for different reasons.
I don't buy ANYTHING now without listening to it first. Either I listen to it at the local library, the local Borders, or borrow it from someone I know who has it. If I don't like more than one or two songs on a CD, then there isn't a chance in hell I will buy it. If there is a song I really like, I may rip a copy of it off a friends CD, but this is not a lost sale, because I WILL NEVER BUY THE FUCKING CD AT FULL PRICE to begin with. I will wait until I can get it at the local Salvation Army for $0.25.
And that's the way it is.
To the RIAA: Deal with it fuckers. In the last 10 years you've managed to produce about 6 songs I like. Not exactly an exemplary sales position, is it.