Album Sales Show 9.2% Increase In Quarter as Rebound Continues

Monday, April 05, 2004 | 06:21 AM

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Here's yet another example of a story getting almost zero play (Thank goodness for the WSJ):

Back in December 2003, we noted that CD sales were rising as the economy strengthened. That healthy trend continued, as we mentioned in February. For the quarter, we saw album sales gain another +9.2%, year over year, Q1 2004:

"A rebound in music sales that began in September appears to be continuing, according to data to be released today by Nielsen SoundScan.

Album sales for the first quarter rose 9.2% from a year earlier, with strong gains in sales of both current and older albums. Total sales for the quarter reached 158 million copies, up from 144.7 million for the first quarter of 2003.

The music industry has been battling a sales decline that began in 2000, and has been trying a variety of strategies to turn it around. Among them are continuing lawsuits against alleged online pirates, enforcement actions against pirates of physical CDs and efforts to lower consumer prices.

Of course, regardless of the positive data, the industry refuses to acknowledge what is happening with sales or why. If they did, they would lose their legislative leverage in DC:

"Despite the favorable results, the music industry is far from out of the woods. "At least through September, the industry will have an easy time beating last year's numbers," said Geoff Mayfield, Billboard magazine's director of charts and senior analyst. "We had weak numbers throughout the first eight months of last year."

The industry continues to cut back. Yesterday, EMI Group PLC announced it was cutting 1,500 jobs, or 20% of its work force, and dropping weak acts from its roster. Warner Music Group also is in the midst of deep personnel cuts.

One particularly noteworthy performance this week came from R&B singer Usher, whose "Confessions" became the second album in as many months to sell more than one million copies its first week in stores. Norah Jones's "Feels Like Home" in February also sold more than a million copies its first week in stores; that debut marked the first time in two years that an album had done so.

Strong new titles like these have been a factor in the sales bounce, but they aren't the entire story. Sales of older titles, known in the industry as catalog, also surged 8% from a year earlier, according to SoundScan. Music companies and retailers are said to have experimented with lower pricing on new and catalog titles, though the music companies generally don't share wholesale pricing information."

Pathetic.

Source:
Album Sales Show 9.2% Increase In Quarter as Rebound Continues
By ETHAN SMITH
WALL STREET JOURNAL, April 1, 2004
http://online.wsj.com/article/0,,SB108071645185870088,00.html

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http://www.nytimes.com/2004/04/05/technology/05music.html

A Heretical View of File Sharing
By JOHN SCHWARTZ

The music industry says it repeatedly, with passion and conviction: downloading hurts sales.

That statement is at the heart of the war on file sharing, both of music and movies, and underpins lawsuits against thousands of music fans, as well as legislation approved last week by a House Judiciary subcommittee that would create federal penalties for using what is known as peer-to-peer technology to download copyrighted works. It is also part of the reason that the Justice Department introduced an intellectual-property task force last week that plans to step up criminal prosecutions of copyright infringers.

But what if the industry is wrong, and file sharing is not hurting record sales?

It might seem counterintuitive, but that is the conclusion reached by two economists who released a draft last week of the first study that makes a rigorous economic comparison of directly observed activity on file-sharing networks and music buying.

"Downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates," write its authors, Felix Oberholzer-Gee of the Harvard Business School and Koleman S. Strumpf of the University of North Carolina at Chapel Hill.

The industry has reacted with the kind of flustered consternation that the White House might display if Richard A. Clarke showed up at a Rose Garden tea party. Last week, the Recording Industry Association of America sent out three versions of a six-page response to the study.

The problem with the industry view, Professors Oberholzer-Gee and Strumpf say, is that it is not supported by solid evidence. Previous studies have failed because they tend to depend on surveys, and the authors contend that surveys of illegal activity are not trustworthy. "Those who agree to have their Internet behavior discussed or monitored are unlikely to be representative of all Internet users," the authors wrote.

Instead, they analyzed the direct data of music downloaders over a 17-week period in the fall of 2002, and compared that activity with actual music purchases during that time. Using complex mathematical formulas, they determined that spikes in downloading had almost no discernible effect on sales. Even under their worst-case example, "it would take 5,000 downloads to reduce the sales of an album by one copy," they wrote. "After annualizing, this would imply a yearly sales loss of two million albums, which is virtually rounding error" given that 803 million records were sold in 2002. Sales dropped by 139 million albums from 2000 to 2002.

"While downloads occur on a vast scale, most users are likely individuals who would not have bought the album even in the absence of file sharing," the professors wrote....

Posted by: anne | Apr 6, 2004 2:26:59 PM

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