The recession in the music industry – a cause analysis

The recession in the music industry – a cause analysis

I love good research. It beats speculation, rumor and opinion every time. (I’m most easily persuaded with fact.) This rather long article examines why the CD business (not the music industry really) has been shrinking.

It’s not “unauthorized downloads” that’s the problem, according to the article:

To sum up, the expanding market from the 1960s to the late 1970s was based on a market segmentation strategy by establishing new music genres and long-play products as a key source of sales. But this led to smaller and less profitable market segments and subsequently to declining sales and revenues in the late 1970s. With the launch of the CD in 1982/83, the major companies focused on superstar acts, and revenues soared again in unprecedented heights in the 1980s and 1990s. One must not oversee that the CD-boom was mainly fueled by the re-release of repertoire still existing on vinyl. The superstar-orientation as well as the CD format ensured that the album became the main source of sales in the industry. The single lost its importance and finally assumed only the roll of a test market.

When these structures were confronted with the track-culture of the Internet, the album market turned once again into a less economically viable single market and caused the slump in sales of the last decade. The figures also show that the single-format, thanks to strong sales of digital downloads, is on the rise and already have matched long play-sales on a pure per unit basis. The labels’ task is now to find again a model in which music in bundled form increases not only the revenues and profits but also the music consumers’ benefits. However, this is more difficult to achieve under the prevailing conditions than the increase of mobile and online music sales based on single-tracks. If, in addition, the insight prevails that file-sharing is in fact not the cause but merely a side-effect of the current transitional phase and that it actualy represents a promotional opportunity for thus far unknown acts, then sales might increase again that thus help overcome the recession in the phonographic industry.

Where the music industry goes, film and TV will follow as bandwidth increases.