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Accounting With the RIAA

Via Slapnose, it turns out that the RIAA has some interesting ideas about what it means for album sales to go down:

Sherman's statements hinged on a statistic published by the IFPI. "Surveys in all major markets prove [file-sharing] is a major factor in the fall in world music sales, down 7% in 2003, and down 14% in three years." (Their Web site, which claims to "represent the industry worldwide," but, oddly enough, doesn't readily explain what the anachronism, IFPI, means, has a "fact sheet" at (http://www.ifpi.org/site-content/press/20040330c.html) But the RIAA's website chart claims only a 7.1% drop in units SHIPPED. (http://www.riaa.com/news/newsletter/pdf/2003yearEnd.pdf)

There is only one logical integration of all these statistics with the recent Soundscan data: even though actual point-of-purchase sales are up by about 9% in the US - and the industry sold over 13,000,000 more units in 2004 (1st quarter) than in 2003 (1st quarter) - the Industry is still claiming a loss of 7% because RIAA members shipped 7% fewer records than in 2003.

Forget the confusing percentages, here's an oversimplified example: I shipped 1000 units last year and sold 700 of them. This year I sold 770 units but shipped only 930 units. I shipped 10% less units this year. And this is what the RIAA wants the public to accept as "a loss."

Interesting. This seems like a good moment to refer to Daniel Davies' one minute MBA in which we learn that "Good ideas do not need lots of lies told about them in order to gain public acceptance," and that "that the difference between 'making a definite single false claim with provable intent to deceive' and 'creating a very false impression and allowing it to remain without correcting it' is not one that you should rely upon to keep you out of jail."

March 31, 2005 | Permalink


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Keep in mind revenues for the RIAA will have fallen as they had to allow for lower CD prices after they were busted for price fixing.

Posted by: Rob | Mar 31, 2005 1:08:16 PM

Well, that particular lie can't continue forever- either the two numbers will crash into each other, or they'll have to ship more units some year soon, at which point they can't complain about falling sales.

Posted by: SP | Mar 31, 2005 1:29:57 PM

When did Soundscan go into effect? I know that one of the effects of Soundscan was to let retailers and labels know exactly what was selling each week, and adjust ordering accordingly. This is why the classical music departments have shrunk drastically. They used to not know for a year or so (the deadline for stores returning CDs) how a particular title was doing. With Soundscan, they knew that a CD they spent $50,000 promoting sold 12 copies that week.

I know this happened in the late 90s. The shakeout probably took a while and might still have been an effect.

Also - were CD singles a "unit." I know that the industry stopped selling CD singles in the early 00s because they were allegedly cutting into full CD sales. Suprise, suprise the percentage drop the industry blamed on piracy was roughly equal to the percentage of market revenue CD singles had previously brought in.

Why anybody listens to these guys is beyond me.

Posted by: Marysquito | Mar 31, 2005 1:48:26 PM

I'm still trying to figure out how IFPI is an anachronism.

Posted by: mwl | Mar 31, 2005 3:50:10 PM

i've read similar statisitcs about record releases, but don't have the actual figures or time frame with me to be accurate. but the gist of them was that over a certain time period, possibly the very same "last three years", the record industry has released 25,000 fewer releases by artists.

so during these last three years of "seclining sales", the pool of available releases to purchase has shrunk by 25,000. to say, for example, all those fans of artist so-and-so have been denied an opportunity to purchase a new release by said artist, because the record company dropped said artist from their label and so did not release any new product by them.

and thus lost the 100,000 or so units in sales that that artist may have had. now, multiply by 25,000.

Posted by: achn2b | Mar 31, 2005 9:25:58 PM

that's "declining sales" oops.

Posted by: achn2b | Mar 31, 2005 9:27:33 PM

Well, that particular lie can't continue forever- either the two numbers will crash into each other, or they'll have to ship more units some year soon, at which point they can't complain about falling sales.

No, not necessarily, as Marysquito alluded to. If music stores are doing significantly better inventory managment than they used to (as a product of technological developments like overnight Soundscan data), there may be a permanent shift in the ratio of CDs shipped to CDs sold. In Slapnose's example, the music store in year 0 ordered 1000 units, of which 300 were duds - they were mis-ordered. 30% of orders were not productive. Then the store got better at ordering. In year 1, the store ordered 930 units, of which only 150 were duds. They could continue to repeat this, now being better at ordering, leading to permanently higher unit sales by the store and permanently lower units ordered.

This is pretty credible. With big box retailers like Wal-Mart moving into CD music over the last 5-10 years, there is bound to be competitive pressure towards Wal-Mart grade inventory management. Which has very little to do with Grokster.

Posted by: Andrew Edwards | Apr 1, 2005 9:01:59 AM

Soundscan started in the early 1990s, which is why you saw artists previously unheralded by the industry going to No. 1, e.g. Garth Brooks and Metallica.

Posted by: Brian | Apr 1, 2005 9:15:25 AM

mwl - International Federation of the PHONOGRAPHIC Industry.

Posted by: Ken Houghton | Apr 1, 2005 10:29:02 AM

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