30 MusicWeek 15.06.12 BODYTALKERA
WHY MUSIC INDUSTRY’S ‘DIGITAL MILESTONE’ IS NOT WHAT IT SEEMS
Have recent digital revenues really brought about the ‘decline of the CD’? ERA isn’t so sure…
ANALYSIS BY STEVE REDMOND, SPECIAL ADVISOR, ERA
RIGHT The black album: ERA is concerned by national media taking new stats as proof of ‘the death of the CD’
“Had you told most
pundits in 2002 that in 10 years’ time CD would still account for 70% of album sales, few would
have believed you” STEVE REDMOND, ERA
T
here’s a little bit of the farmer in every retailer. It’s too wet, it’s too sunny, there’s too many releases, there’s too few releases etc etc. It’s a standing joke with some label people that
retailers are always, well… moaning. Perhaps it’s because like farmers, so many of the
biggest determinants of success or failure for entertainment are outside their immediate control. Retailers have no control over the product
they are delivered by suppliers, far less over the weather, and yet both can have a significant impact on their business. But, as they say, just because you’re paranoid, it
doesn’t mean they’re not out to get you. Which is what many retailers felt when they
read the BPI’s latest announcement about the growth of “digital revenues”. The record companies’ analysis of business in the
first quarter of 2012 made two key points: (i) that digital had overtaken physical in music (although at the level of record company revenues, rather than retail sales); and (ii) digital’s growth had been enough to return the music market itself to growth. The first objection was to the nature of the
figures themselves. “Record company revenues” are clearly important to record companies, but they say nothing about the health of the “music business”, nor do they reflect consumer behaviour. This is ERA’s take on the first quarter numbers
based on actual sales figures from the Official Charts Company:
RETAIL SALES FIGURES Q1 2011/12 (ERA/Official Charts Company) FORMAT
Q1 2011
PHYSICAL ALBUMS PHYSICAL SINGLES TOTAL PHYSICAL
DIGITAL TRACKS DIGITAL ALBUMS TOTAL DIGITAL
£144,254,547 £733,997
£144,988,544
£34,795,532 £36,976,209 £71,771,741
RETAIL SALES OF MUSIC £216,760,285 STREAMING*
£7,334,000
*Streaming figures are trade values from BPI TOTAL
£224,094,285 Q1 2012
£105,876,877 £449,288
£106,326,165
£37,714,975 £47,420,256 £85,135,231
£191,461,396 £12,400,000
£203,861,396
VARIANCE % –26.6
–38.8 –26.7
8.4
28.2 18.6
–11.7 69.1
-9.0 It is difficult to come up with a “retail” figure for
streaming, but even if you were to double the trade figures for streaming listed above, the overall market would still have declined. The numbers show that in terms of retail sales,
physical accounted for 55.5%, compared with 44.5% for digital. Add in the BPI’s streaming numbers and physical is still in the majority. So no return to growth, and digital most likely
still in the minority - a very different view to the BPI’s figures. It has been ERA’s contention for years that
commentators, market forecasters and the record industry itself have consistently over-estimated the public’s enthusiasm for digital formats. Certainly had you told most pundits in 2002 that in 10 years time CD would still account for 70% of album sales, few would have believed you. Why is this important? It is important, say
retailers, because while they may be made with the best of intentions, such statements potentially mislead and alienate the biggest single group of music buyers in the UK - CD buyers. Sure enough, in response to the release of the
BPI figures, the Daily Telegraph ran a leader column, titled ‘The End of the CD’. The Telegraph was clearly confused by the BPI’s
elision of ‘record company revenues’ and the ‘music business’ and declared “Britons now spend more on downloading music than on buying CDs”. As shown above, they do not. The Telegraph mourned the “passing” of the CD
in humorous fashion. “This historic shift is of more import,” it wrote, “than the last trolley bus, the rise of trainers or the demise of lard. It is up there with the passing of the toasting fork.” The net impact on any reader still fondly buying
CDs would have been to be left feeling a little old- fashioned and behind-the-curve. All this despite the fact that 70% of album sales are still on CD. So where does ERA stand on this? Contrary to the way they are sometimes painted,
retailers view themselves as among the most progressive and internet-savvy forces currently operating in the music market. The record of ERA members like Amazon,
Play.com, 7digital, Spotify, Deezer and We7 speaks for itself. HMV, Tesco, Sainsburys and many others have sophisticated internet operations to compete with anyone. More than half of ERA members operate online. The UK’s rich and diverse array of digital music
services so often trumpeted by suppliers is the result of retail rather than record company investment. What all ERA members, whether digital or
physical, know, however, is that ultimately the consumer is king, and therefore logically music product should be made available in whatever format the consumer would like to buy it in. Their fear is that their suppliers seem not to be
on the same page. Certainly reading last week’s Music Week, one
could be forgiven for believing that record companies can’t wait to get shot of the CD. The chairmen of three of the four UK majors
greeted “music’s digital milestone” as though it was in itself good news. Only Andria Vidler, CEO of EMI Music,
thought to say, “We’ll continue to work with all our retail partners to give them the music that their customers want in the ways they want.” There is a growing feeling at retail that rather
than following the consumer, record companies are trying to lead them to a digital world many simply do not want. The loudest debate should not be about digital
versus physical, they say. It should be about maximising both. Their fear is that if we are not careful the
greatest threat to the CD may not be consumer indifference, but industry neglect. Or is that just paranoia?
This piece is based on the latest edition of the popular Redmond Blog on the ERA website
www.eraltd.org
www.musicweek.com
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