Are mp3s the cause of lower CD sales?

By Joshua O'Connell
Posted Saturday, July 12, 2003

My music collection is very sizable. I have over 1000 CDs, 200 tapes, and 100 records. The number of singles I have amounts to be over 1,000 when added up via all the formats. I've probably been one of the more loyal customers for the music industry since I first was given a few cassette singles as a birthday gift in 1994.

The past six months, however, I've only bought a half-dozen CDs, and a dozen singles, a mere third of what I've purchased in the past. The reason? I didn't "discover" Kazaa, or Napster before it. The reason is because my bills are barely equalling my salary.

The music industry, led by the lawsuit-happy RIAA, has been saying for quite some time that music downloading has been the cause of a quick and painful drop over the past two years; CD sales dropped by 10% is 2002 and a similar drop appears to be shaping up for 2003.

I find it hard to believe that music downloading is the sole cause for this. I'm sure that some sales are being lost to this, but let's look at it more carefully.

A few years ago, there was a boom in teen artists. 'NSync was able to sell 2.4 million records in just one week in 2000, a huge sum. Britney Spears, The Backstreet Boys, and other pop artists were blowing through millions of copies of albums. The fad has faded considerably though, and it's caused a lot of concern for labels who need million sellers to keep their system afloat and profitable. Meanwhile, indies can sell 20,000 copies of a record, and sometimes even less, and be profitable for both label and artist.

The label system is archaic and too much of a machine, shifting from fad to fad, milking it (how many Britney copycats did we get forcefed? Backstreet Boys copycats? etc.) until it's dry, and then finding the next big thing. But it seems that when people get psyched about an artist, sales aren't hurt.

Take Eminem. His latest CD sold in a huge way, and it was released in 2002. Enya, a new-age artist, sold 5 million copies after a song of hers, "Only Time," became her biggest hit in 15 years. The buzz behind 50 Cent caused a huge explosion of sales. And "American Idol" winners have seen singles sales do quite well over the past year or so.

There are a few big problems with the way things are done right now. The first major issue is many CDs are filled with more filler than they should be. There are too many CDs that have too many sound-alike songs, or just not enough strong songs to warrant shelling out what now amounts to $20 a CD, or $10 if you're enterprising enough and buy it the first week it's out at a discount chain like Best Buy or Target. Some truly great CDs get missed from the tide of horrible CDs being released. For every great CD, there's tons of bad ones or so-so ones that just aren't worth the money. If you only like one song off an album, chances are you're not going to buy it. Music buyers are voting with their wallets... by closing them and downloading the one decent song off a peer-to-peer system.

Second is the price of a CD. It costs merely pennies to produce one, but each step in the distribution chain takes a sizable chunk. When it gets to a CD store, there's been a couple of takes that drive the minimum price of a CD to around $10. That's just unacceptable. Why should someone pay $20 for a CD that's 45 minutes long and has 30 minutes of pure garbage when they could buy a two hour DVD for the same price, loaded with extras, commentary, and so forth? I used to love the fact that I could get a video on VHS for $8.99 at Circuit City, but now I don't have any problem paying $20 for a good DVD. Heck, if I have the money, I'll pay $60 for a TV show collection. If you buy a DVD, you know it's one product - one continual piece - that's either good or bad. A CD's quality is limited to the songs you hear on the radio, and the best ones are usually chosen. The knowledge of what's left is limited to what's been reviewed on billboard.com or some other music site. It's too much of a crapshoot, unless it's an artist who produces quality music reliably.

Third is the loss of singles. Record companies constantly point at how sales have diminished, but it's simply because they're not available. If an American Idol contest winner can sell 250,000 copies of a single, it's obvious that the right promotion can not only cause them to sell, but likely sell profitably. I buy singles of songs where albums aren't available yet, or have special mixes or unreleased tracks, especially by artists I enjoy. I don't mind paying $5 for one either, especially when I can't trust albums nowadays, but I can trust a single I've already heard.

Finally, it's impossible to find many older CDs nowadays. Sure, there's remastered catalog, but I've already got all of the big artist's major albums. In 1992, at the ripe old age of 10, I heard a song on the radio by Cathy Dennis. At least, I heard a song. They didn't announce who sang it, so I had no clue who sang it. Three years later, I caught a re-run of Beverly Hills 90210 and saw Cathy Dennis singing it. Finally I was able to attach a name to the artist. But the album was no longer available and eBay didn't exist yet, so it took me another two years of searching every record store before I finally found one in a used record bin. I liked the CD I ended up with so much that I ordered a second one off of eBay a year later just in case the first one got scratched up, and found a copy of the single to buy as well. I liked it THAT much. But the CD wasn't a big seller. Nowadays, if it didn't sell millions before, it won't be there now, and that means albums that were good but weren't big sellers out of the gate get ignored. I'm a huge fan of the 1997 effort by Swing Out Sister called "Shapes and Patterns," an album by a group who hasn't had a hit in the U.S. since 1987. They performed on a local TV station, and I ran out and bought it, and to this day listen to their music on a regular basis. That means for those looking for rare music that isn't in music stores, they have to resort to downloading it, especially when eBay or amazon.com doesn't always have it, despite their best efforts to be a one-size-fits-all shopping arena.

Further proof that record companies really are following the wrong approach can be seen by the Apple Music Store. Apple, which has a very small installed base of computers for home use, has managed to sell five million songs in their store in a two month period. The service lets people buy songs for 99 cents or download whole albums for under $15 (usually). I can't wait for the PC version, because finally someone understands - affordable music, and getting to choose the songs I want instead of getting two I want and 13 that stinks, is a profitable venture. If Apple makes just 10 cents a track, that's $500,000 made just off of a small group of users. And those who have tried it say it's addictive. You can burn the song, use it on up to three computers, and so on - something the record labels' offers didn't allow easily or cheaply. They advertised it - people are actually aware of it, but I wonder how many people have heard of MusicNet or PressPlay. (If you haven't, that's what the major labels started offering awhile ago.)

The best part about Apple's setup is it's affordable enough even during the down economy. This argument is probably the most important, despite the fact that I've used all this space highlighting other problems. Many people have lost investments, retirement money, or even their jobs. If you're six months without a job, are you going to spend money on CDs or your mortgage?

The record companies are now preparing to sue a sizable number of users who offer music for downloading on the major peer-to-peer networks. While I can't say I blame them for the reasons, it's the wrong way to approach getting people to stop sharing music. In the rare time I need to download a new song for a college radio show I host, it's impossible to get a high-quality, REAL file. It's muddied by a bunch of fake files designed to frustrate people. I'm frustrated, and I'm sure others will be willing to pay that 99 cent fee when it's available on the PC. But suing your customers will just shun them further, and sales could be hurt further. Yes, I've downloaded songs, but I still buy CDs. And if I were to be sued, I doubt music would be all that important to me anymore, especially when the money I'd use for buying CDs for the next umpteen years would be sent directly to the RIAA thanks to their lawsuit's judgement.

Programs like Kazaa do cause problems, but I don't think it's the real reason music isn't being bought in mass quantities. The combination of an improving economy, truly decent ways to purchase music and burn it online, the revival of singles and cheaper prices would all go a long way to stabilizing the music industry's strife, and may even actually improve sales further. Digital files don't have physical pieces that have to be manufactured at a cost. If they pass the savings on to the consumer this time, unlike when the CD was released and they pocketed the difference, I think the music industry can weather this storm.

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