Editor's note: Dark days lie ahead for our beloved SACD and DVD-Audio formats. The latest RIAA report is in. In terms of retail dollar share...SACD is down 18% and DVD-Audio is down a whopping 64%. This does not bode well audiofans...
WASHINGTON -- Music shipments of all physical formats to retail and other outlets declined by 5.8 percent in the first half of 2005, while a growing legal digital marketplace helped to offset the overall decline, according to data released today by the Recording Industry Association of America (RIAA).
While the area of legal digital downloads showed some progress, the music industry continues to be impacted by illegal online downloading, rampant unauthorized CD burning and traditional counterfeiting of physical products. These various forms of piracy are the primary culprits for a 6.5 percent decline in CD shipments from record companies to various distribution channels.
Even as the overall market declined, legal digital sales of singles grew 154 percent in the first six months of 2005, compared to January – June of 2004. In the first half of 2005, 148.7 million digital singles were downloaded, compared to 58.6 million in the first half of 2004; 5.1 million full-length albums were downloaded from legal online music sites in 2005, compared to 1.5 million full-length albums downloaded in the first half of 2004. The total estimated retail value of digital singles and albums sold in the first half of 2005 was $198 million, compared with $73 million for the first half of 2004 (estimate derived using current prices of $0.99 and $9.99, respectively).
Despite important and effective strides by the music community to begin to slow the effects of piracy, it remains an ongoing threat to the legitimate sale of music online and in record stores. Analysis by the NPD Group reveals that "burned CDs" accounted for 29 percent of music obtained by listeners in 2004. The NPD study showed that among households with Internet access that are burning CDs, 17 percent of those are burning more than 10 CDs per month. According to Nielsen SoundScan, record store sales of the Top 200 albums, the most frequently illegally burned and downloaded, declined from 102.8 million units to 93 million units, when comparing the first half of 2005 versus the first half of 2004.
When shipments of all physical products are combined with sales of digital downloads, the total unit count for the first half of the year is 343.9 million, which represents a 2.4 percent decline (counting both digital and physical singles as 1/12th of an album).
The growth and potential of the emerging digital marketplace is also reflected in new RIAA surveys and analysis. According to a June 2005 survey by Public Opinion Strategies (POS), on behalf of the RIAA, twice as many adults (ages 18 – 54) have paid to download music as compared to a similar survey last year – 13 percent in 2005 versus 6 percent in June 2004. Additionally, according to that same survey, the percentage of adults who have paid to download music legally is now higher than the number of adults who have downloaded music from an illegal peer-to-peer network – 13 percent have paid to download while 12 percent say they have downloaded illegally from a peer-to-peer site.
“Even as we continue to transform ourselves and transition to the digital marketplace, the music community is still suffering enormously from the impact of various forms of music theft,” said Mitch Bainwol, Chairman and CEO of the RIAA. “One of the stories we need to repeatedly tell in the coming months is that illegal downloading and burning continue to compromise the industry’s ability to invest in the new bands of tomorrow.”
“We are encouraged by the growth of the digital music marketplace,” added Bainwol. “Music labels are working closely with their technology partners to offer fans an incredible, high-quality experience – from download to subscription to legal peer-to-peer sites. And by handing down the unanimous Grokster decision, the Supreme Court has done its part to help level the playing field for all legitimate players. The debate about right and wrong has been settled.”
The RIAA’s CEO also said that the music companies have worked diligently over the last several years to respond to consumers’ demands by offering high-value music experiences. Fans’ passion for music, as well as the importance that it plays in their lives, is as high as ever. According to a survey conducted for the RIAA by Taylor Research, 91 percent of adults polled said that listening to music is important in their daily lives.
In addition to an unprecedented array of digital ways to access music – download services, subscription services, nascent legal peer-to-peer services, cell phone ring tones and ring tunes, and Internet and satellite radio – music companies are working closely with retailers and others to develop exciting high-value offerings in physical formats. DualDisc, an innovative new product that combines music, film and video on a single, two-sided disc, shipped more than 7 million units in the first half of 2005, including two consecutive No. 1 albums earlier in the year.
“In a relatively short amount of time, this industry has revolutionized itself and the way it does business,” Bainwol said. “We are responding to consumers, working with our partners in various technology industries, and delivering some of the best music ever to our fans.”
The complete report is available here.
