No. 18

December 01, 2014

I watch alot of CNN and PBS always trying to keep up with the market, the latest economic news, and futures. It's at best difficult to keep up with the changing trends, especially in the music industry. In the past year there have been noticeable patterns, new trends which seem to have a place in futures, which lead me to make the prediction that music sales will be the worst ever in 2015. I have often wondered lately what will musicians do, how will they survive ?

Since the downturn of the economy began several years ago I have watched countless news broadcasts across the country run stories, approaching every holiday, about how great the economy is, how consumer confidence is up, and holiday sales are going to be better than last year. Time and time again these holidays pass and sales end up being worst than in previous years. This was never so evident than it was in the last week approaching Black Friday and Cyber Monday 2014. It was a nationally spread news story how sales this past weekend were expected to be 13% greater than last year, again because of the growing economy and consumer confidence. Clearly they run these stories as hype trying to drive more consumers out to shop. Once again this big sale weekend came and went and sales were worst than last year.

According to retailers sales this past weekend were down anywhere from 6% - 11% depending on whose numbers you are looking at. Some of this data is based on surveys conducted and numbers are easy to skew, so I wouldn't rely on any of these figuress as absolute. Online retailers seem to have seen an increase in sales over last year, but it may not be as cut an dry as you might expect. One thing stands consistent between these figures, the average amount spent per consumer was down from an average $150 per consumer to $120 per consumer. All of these things point to an economy that is still waning, high unemployment, where consumers just don't have as much money to spend. There's no ignoring the fact that wages are still stagnant and consumers prices continue to rise at levels exponential to those those wages.

In the past year I've watched an alarming trend emerge within the music industry. More businesses have continued to close their doors, more musicians are calling it quits and "retiring", more bands and labels are crowd funding their projects, and more middle-men emerge from the woodwork to tap the musician with fees and a charges that net a result of little to no benefit to the artist. Most are extracting up to 50% of an artists gross earnings offering services like publishing, distribution, promotion, etc. while making no investment of their own to the model. It is mainly up to the artist to give away this huge portion of their gross earnings while being expected to invest additional money promoting these middle-men and driving sales to them. This is insane. Why do musicians continue to support this highway robbery, fueling it, so it will go on ? One has to wonder what it will take before artists stand up for themselves to reclaim the market and art form they have so easily given away. Likely by the time they even realize the reality, it will be too late to salvage. One thing is clear. We are coming close to reaching a saturation point in the music industry. The number of bands steadily increases, the number who are mediocre steadily increases, the number of bloodsucking middle-men increases, and the amount of gains for musicians steadily declines. With artists lacking a positive cash flow, continued decline in sales, and consumers having less money to spend, the breaking point steadily approaches. There is nothing to indicate that sales in 2015 will be any better.

Nielsen's SoundScan report, on trends in the music industry for 2014, calculates sales were down another 15% this past year. There was a decline in streaming, a decline in cd sales, and a decline in overall music consumption. Vinyl sales however saw an increase in sales, likely due to their collectible value as an investment. According to the Recording Industry Association of America (RIAA), while industry revenues from digital formats continue to grow, surpassing $4 billion for the first time in 2012, and reaching nearly 4.4 billion in 2013 while accounting for 64% of industry revenues, digital music theft has been a major factor behind the decline in sales over the past 15 years. Although use of peer-to-peer sites has flattened during recent years, other forms of digital theft have emerged, including unauthorized digital storage lockers used to distribute copyrighted music, streamripping programs, and mobile applications that enable digital content theft.

Some interesting statistics you that may not be aware of : Since peer-to-peer (p2p) file-sharing site Napster emerged in 1999, music sales in the U.S. have dropped 53 percent, from $14.6 billion to $7.0 billion in 2013. From 2004 through 2009 alone, approximately 30 billion songs were illegally downloaded on file-sharing networks. NPD reports that only 37 percent of music acquired by U.S. consumers in 2009 was paid for. According to the Information Technology & Innovation Foundation, the digital theft of music, movies and copyrighted content takes up huge amounts of Internet bandwidth 24 percent globally, and 17.5 percent in the U.S. Digital storage locker downloads constitute 7 percent of all Internet traffic, while 91 percent of the links found on them were for copyrighted material, and 10 percent of those links were to music specifically, according to a 2011 Envisional study.

The music industry, while enormous in its economic, cultural and personal impact, is by business standards relatively small. So theft on this scale has a noticeable and devastating impact: employment at the major U.S. music companies has declined by thousands of workers, and artist rosters have been significantly cut back. The successful partnership between a music label and a global superstar and the revenue generated finances the investment in discovering, developing and promoting the next new artist. Without that revolving door of investment and revenue, the ability to bring the next generation of artists to the marketplace is diminished as is the incentive for the aspiring artist to make music a full time professional career.

I think we're going to see a huge shift away from label financing and personal investment in music projects, in favor of less risky crowd funded projects. Crowd funded music projects have doubled every year and in 2014 amounted to 6% of music releases. Crowd funding will likely reach 12% by the end of 2015, and it wouldn't be unrealistic to speculate it reaching more than 50% of all music projects in less than five years. The problem with crowd funding is that it makes things even harder for the independent artist. Unless a large crowd of people know who a band is, follow them, and contribute, those bands are not going to get funded and have successful campigns. With continued rising cost of living and people now subject to higher costs for mandatory health care which are taking affect this year, the outlook is not sunny. 2015 is poised to be one of the worst years for sales in the music business and it seems inevitable that more businesses will close their doors and more musicians will call it a day.

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