Saturday, April 4, 2015

The Lowly CD Still A Big Part Of The Music Business

Written by Bobby Owsinski -- All of the music industry news for the last year or so has been directed at oncoming music streaming steamroller and the downfall of the music download, but what’s interesting is that our good old physical CD still remains a huge part of the music business. The latest report from the Recording Industry Association of America (RIAA), the music industry’s trade group, shows the 2014 sales of the bright and shiny disc at $1.85 billion, or about 27% of the total U.S. recorded music revenue.
There’s no denying that CDs are on the way out, with unit sales falling another 16% in 2014 from the previous year. It’s true that it’s just a matter of time before the format goes the way of the vinyl record (although there’s been a recent resurgence), the 8 track tape and the cassette. What’s interesting is that the 144.1 million CDs officially reported as sold by the RIAA in 2014 doesn’t represent the real total by a long shot.
The CD sales listed in the annual revenue statistics revolve around sales reported via Nielsen Soundscan, the retail system that registers the sale at the point of purchase by scanning the barcode.
While that’s most likely the majority of CD sales sold at retailers and online giants like Amazon, it isn’t all of them though. CDs sold by artists and bands at their gigs or on their websites aren’t counted. Neither are CDs sold at worship events. And of course, bootleg CDs aren’t in those totals either. In fact, there’s a huge underground economy still based on the CD that just doesn’t register on the RIAA’s radar.
That said, the CD business is falling and when it finally hits the ground, it won’t be able to get back up. In 2014, streaming revenue from services like Spotify and Pandora overtook CD sales for the first time, ringing up $1.87 billion in revenue.
If you’ve read any of my posts on streaming from the last year, you know that we’ve only seen the tip of the iceberg when it come to streaming. There are still only 7.7 million paid subscribers to streaming services in the U.S., and it’s not beyond the realm of reason to believe that figure won’t rise to at least 30 million, or even 50 million, in a few years, especially with the introduction of Google Music Key and the upcoming Apple streaming service.
If you extrapolate that out, it’s easy to see that streaming income alone can account for about the same $6.97 billion total industry income, more than offsetting the decrease in CD and music download revenue. If anything, we might finally begin to see an increase in revenue if streaming takes off like many industry analysts predict.
That said, the CD isn’t dead now, and it probably won’t be dead a few years from now either regardless of the streaming service’s inroads. It’s definitely a format on the wane, but it may take a lot longer to finally put the last nail in the coffin than people think.
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