Slyck.com
 
Slyck Chatbox - And More

Is the Physical CD Still A Viable Market?

Discuss Slyck's latest news
Forum rules
PLEASE READ BEFORE POSTING: Slyck Forum Rules

Is the Physical CD Still A Viable Market?

Postby SlyckTom » Wed Mar 15, 2006 2:20 pm

It doesn’t take a PhD in marketing and socio-economics to realize the physical CD market is in serious decline. Since its peak sales year in 1999, there has been a steady deterioration in the number of physical CDs sold and shipped. The most immediate blame is typically placed on piracy, however over the course of the last six years this has proven superficial to reasons of more substance.

Physical CD sales began their long trek into mediocrity in 1999, and continue to do so today. Transparently, online piracy has been directly blamed – the logic being those participating on P2P networks would rather steal a few songs because of the convenience and disregard for intellectual property rights. Over time however, this notion has been largely dismissed. P2P, file-sharing and piracy is not the direct cause of decline of CD sales. Rather, it’s a small step in a much larger and shifting marketplace.

The time period represented by the decline of Physical CD sales are and continue to be years of transition. During this time frame, the method in which information is transferred over the internet was revolutionized. IRC, Napster, FastTrack, Gnutella and BitTorrent became mainstream acquisition methods for searching, downloading and listening to music.

So it would seem P2P and file-sharing are the very reasons CD sales are in decline. But let’s dig a bit deeper. It was not decided in one day that tens of millions of people would randomly commit copyright infringement and online piracy. Several avenues were put into place that would help foster this remarkable transition.

During the turn of the millennium, portable CD players fell into decline while MP3 players became the dominant music listening device. Of course in order to make a CD player a viable device, you need CDs – and a lot of them. In pedestrian cities like New York, the limitations of the physical CD are apparent. An individual is either forced to carry only the CD the player can handle, or lug around a small collection. And carrying much of anything in New York isn’t always the brightest idea.

The MP3 player resolves this issue. Small, sleek and compact, virtually any MP3 player – even low end models – are capable of holding dozens of albums and thousands of songs. The situation then becomes, how does one fill their MP3 player.

For many consumers, there are only two options. Download music files from a P2P/file-sharing network, or rip and copy from a CD – both of which are frowned upon by the music industry. But the decision to engage in these activities is not driven by a desire to steal or commit copyright infringement – rather the music industry provided no alternative to the limitations of the physical CD. This inflexibility to meet the demands of a rapidly shifting music market has cost the music industry valuable time and allowed the P2P/file-sharing market to flourish.

Only within the last year has the music industry been able to make some kind of headway into the digital music market. The effort has been at times lackluster, at others showing hints of promise. Yet the underlying facts remain – iTunes managed to sell only 1 billion tracks over the course of the last 3 years; while only marginally offsetting the decline in physical CD sales.

Whether from iTunes or FrostWire, the question becomes, “Why should I buy a $15.00 album from Tower Records when I can buy just the song I want for $.99 – or – download the entire album at not cost?”

It’s a perplexing question, and the music industry’s handling of the Sony-BMG rootkit fiasco has made the morality argument difficult to adhere. NARM, or National Association of Recording Merchandisers, recently hired The NPD group to explore the reasons and possible solutions to the plague of declining CD sales. NARM is a trade organization that represents the interests of major music retailers such as Virgin Megastores, Tower Records, and BestBuy.

Typically when The NPD Group, a research organization based in Long Island, New York, chimes in on the digital music market their conclusions tend to reflect something other than reality. This time however, their research conducted for NARM is more realistic. The primary goal of NARM is to “encourage the sustained health and vitality of the industry – and especially of our core retain/wholesaler constituency-primarily via preserving the value, highlighting the benefits, and promoting the sales of physical music and entertainment products.”

Highlight benefits? Promote sales of physical music? Preserve the value? Is such a notion possible in a rapidly digitizing world? The conclusion of the NPD Group: maybe.

Despite the over 30% drop in shipments, the music industry still managed to ship over 750 million CDs in 2005. It’s dilapidated, true enough, but the industry is still bringing in billions of dollars in revenue each year. The NPD Group feels there is enough internal strength left in the physical CD market and perhaps regain the prosperity witnessed in the late 1990’s.

The NPD Group also concluded that while physical sales are down, music consumption is up over 12% since 1999. The age group queried in the survey determined the method in which music was acquired. Those in the 18-24 age group primarily used P2P and ripping methods to obtain music, while those in the 45 and older group obtained music from store purchased CDs. Over all, over 50% of all acquisition methods were related to P2P or ripping, while only 43% obtained music via physical CD. This is a drop from 51% in 2004.

In addition, the NPD Group found the average number of shared files is actually on the rise. The NPD Group found the average file-trader shared about 33 songs in August of 2003 (about two months after the RIAA announced the beginning of the lawsuit campaign.) This average has risen to 55 files per user in December of 2005. Interestingly, the NPD Group also found the authorized digital music has stagnated at around 40-50 tracks per household throughout the year 2005.

To sum up, the NPD Group iterated all the ghastly problems facing the physical market – the ubiquitous nature of P2P, a ho-hum authorized digital music market, and the allure of ripping and burning. Now let’s get people back in the music store, shall we?

As part of the NPD Group’s conclusions, they claim it’s possible to reverse the current downslide and actually promote a 6%-8% increase in physical sales. Contrary to the music industry’s claim, the younger age demographic actually spends more on CDs than any other age group. In fact, the 13-18 age group has show marginal increases in physical CD spending habits. The culprit, the NPD Group claims, is the older generation.

With money to burn and the internet at their fingertips, the incentive for the older demographic to purchase physical CDs is in rapid decline. For established adults, spending $0.99 for an iTunes download is a mere drop in the bucket.

The study almost seems to suggest the younger demographic is already a cause lost to the annals of free music, whether by ripping or P2P/file-sharing. Instead, the study suggests the music industry shift their attention from this demographic and market towards those who are already purchasing physical CDs.

By revolutionizing their marketing by appealing to established music buyers or the older demographic, which may require as little as just one more trip to the music store each year, the NPD Group estimates sales could improve 6%-8%. This marketing requires creativity, an integration of “brick & mortar” with digital services (such as create your own CD kiosks) and more discounts.

There’s a lot of good statistical information, colorful graphs and other idiosyncrasies that made the latest NPD Group effort border on insightful. It presented a realistic evaluation of the music scene, but serious considerations still remain. Namely, the flexibility offered by digital services – whether by iTunes or P2P – are simply more compatible with realities of portable MP3 players. The serious likelihood that physical retailers may become a relic rather than a viable option is a consideration NARM is probably fully aware of. Whether they can adapt in enough time will be decided in the coming years.
Follow us on Twitter @SlyckDotCom
Join our Facebook Fan page
SlyckTom
 
Posts: 5713
Joined: Fri Jul 26, 2002 7:22 pm
Location: New York City

Postby MrFredPFL » Wed Mar 15, 2006 3:11 pm

SlyckTom wrote:And carrying much of anything in New York isn’t always the brightest idea.


that's funny and sad at the same time - and it of course is not limited to new york :?
User avatar
MrFredPFL
I am Spartacus
 
Posts: 14803
Joined: Wed Aug 17, 2005 4:48 pm

Postby locotus » Wed Mar 15, 2006 3:29 pm

Good writting, but I would've preffered "Recorded Physical CDS" as the title, because blanks CDs are a quiet different market.
locotus
 
Posts: 125
Joined: Fri Apr 09, 2004 2:54 pm

Postby Dormant707 » Wed Mar 15, 2006 3:55 pm

Nice article Tom. Very good stuff.

According to Apple,, they sold:

14,043,000 iPods during the quarter


representing a:

207 percent growth in iPods over the year-ago quarter


That was the last quarter of last year, October 2005 to December 2005.

Analysts project that the numbers of iPods sold worldwide will top 100 million by 2007. Now just imagine the potential of those numbers in p2p terms and I doubt that people are not going to just buy iTunes, but also rip their CD collections to their iPods.

I also believe that iTunes will make their next billionth sale in half the time or less with all the iPods that are being sold.

I think that CDs will be around for a while to come, but they are definitely going to go the way of Vinyl in time to come...
Dormant707
 
Posts: 5067
Joined: Fri Jul 15, 2005 5:03 pm

Postby method77 » Wed Mar 15, 2006 4:08 pm

Since I got my Creative mp3 player and my flash drives, cds are pretty useless for me.
With media players connecting to TV now and compact hard drives around, DVDs will be a thing of the past too.
DJs will be the only ones using CDs in a little while.
method77
 
Posts: 46
Joined: Sun Aug 04, 2002 6:59 pm
Location: Greece

Postby abou105 » Wed Mar 15, 2006 4:10 pm

i still think there is a market for cds, problem is they cost too much and im not willing to pay that price, so i usualy just buy them in the sale like the other day got 3 system of a down albums for £10 and they are off the sale aagian at £15 each, ridiculus
Information is so valuable in todays society, its understandable people want to lock it up, but the internet is about freedom of information, lets not take that away.
User avatar
abou105
 
Posts: 1468
Joined: Sun Jun 15, 2003 4:00 pm
Location: a place in my head

Postby method77 » Wed Mar 15, 2006 4:11 pm

at the moment, yes there is a huge market share but that won't last long
method77
 
Posts: 46
Joined: Sun Aug 04, 2002 6:59 pm
Location: Greece

Postby cjules13 » Wed Mar 15, 2006 4:30 pm

Very soon I think people will have boxes of CDs under their beds just like we all have boxes of cassettes under our beds now...

Sell your CDs now while you can, before they truly are worthless like the tape.
User avatar
cjules13
 
Posts: 193
Joined: Thu Apr 29, 2004 7:35 am
Location: Shytown

Postby abou105 » Wed Mar 15, 2006 6:17 pm

cjules13 wrote:Very soon I think people will have boxes of CDs under their beds just like we all have boxes of cassettes under our beds now...

Sell your CDs now while you can, before they truly are worthless like the tape.


yea ok

But i have a hoarde of Records (most of my dads) in my room i listen to all the time!
Information is so valuable in todays society, its understandable people want to lock it up, but the internet is about freedom of information, lets not take that away.
User avatar
abou105
 
Posts: 1468
Joined: Sun Jun 15, 2003 4:00 pm
Location: a place in my head

Postby NocturnalVagabond » Wed Mar 15, 2006 6:27 pm

I think there is one important aspect people are failing to consider - there is not, at this time, a tangible product alternative to the CD.

Many comparisons are made that CDs will go the way of vinyl. While it is inevitable that CDs as we know them today will phase out, the demise of vinyl was due to the rise of a superior format, but still in a tangible form. Digital files certainly have the potential to replace CDs, but it will not be as quick a change as many expect. A lot of people, particularly older generations, still want to physically 'hold' a product. This will certainly keep the CD market alive for quite some time.

As stated by a previous poster in this thread, the focus does shift from commercial CDs to recordable ones, as more and more people begin to acquire their media from alternative sources, both legal and otherwise. Many consumers are still putting their digital files onto CDs for portability and compatibility with existing devices.

Unless a new, user-friendly medium arrives in the near future, it looks like CDs will be around for quite some time - although probably not the ones the RIAA would like us to have.
User avatar
NocturnalVagabond
Tin Foil Hat Salesperson
 
Posts: 915
Joined: Thu Sep 29, 2005 10:59 pm
Location: Downunda

Postby irish » Wed Mar 15, 2006 6:43 pm

The last cd I bought was over 1 year ago and it was in a sale reduced from 17 euros down to 5. I have no intention of buying one again. I'm in the process of ripping all my collection to a second HD and then I'll sell them off.
Great article Tom.
User avatar
irish
 
Posts: 1830
Joined: Tue Feb 15, 2005 5:03 pm
Location: Na hOileain Chanaracha

Postby zim » Wed Mar 15, 2006 7:39 pm

I bought my last cd around the time metallica had a hissyfit at napster.

i will NEVER buy another.

(from any member of the RIAA)
User avatar
zim
 
Posts: 5776
Joined: Wed Apr 20, 2005 10:01 am

how about QUALITY of cd releases?

Postby souper » Wed Mar 15, 2006 8:20 pm

No one seems to be mentioning the quality of music that is released by these UBER-conglomerates these days. of course cd sales are down when all you have to purchase are britney-f'n-spears records, re-hashed guns'n'roses projects, spit-shined boy bands, or Pepsi sponsored "hip-hop". Me thinks if we take a closer look at the real issue (i.e. clear channel), not the symptom (i.e. decline in record sales), you might get closer to the REAL answer/problem...not just ideal sales projections, or P2P-scapegoat solutions.
see: http://www.pbs.org/wgbh/pages/frontline ... usic/view/
Cheers!
User avatar
souper
 
Posts: 1
Joined: Wed Mar 15, 2006 8:03 pm

Just my two penneth :)

Postby tyeth » Wed Mar 15, 2006 8:21 pm

the factorys will be pumping blanks for a while yet,
blanks sell like hotcakes, places like FOPP have loads of great stuff for £5 and the latest for 10-15
i still buy there, even tho i play them on my pc allong with 50gb of mp3s...work that one out...
anyway, if they had all the cds they sell in virgin etc on writeable cd-stations where u could make cds even with the printed disks and covers...cheap as chips hardware for business gives customers custom cds, yes please i hear those greedy consumers cry!

second hand market is already strong but they could even take away business from that with the right levels of value!

______________________
Tye
tyeth
 
Posts: 1
Joined: Wed Mar 15, 2006 8:07 pm

Postby LANjackal » Wed Mar 15, 2006 9:34 pm

The market's not dead to me. I still buy physical CDs, although I download ~ 1500 - 2000 new songs/year as well as complete CD images.

As I type, another one's in the mail and still another is on back-order at Amazon.com. A couple weeks back, I paid around $65 for a single brand new but out-of-print CD.

Of course, I'm the exception, not the rule. Music is to me what heroin is to STP's Scott Weiland - I must have it.
Follow me around the internet!
[Windows 7 Pro x64 (Primary OS)
User avatar
LANjackal
 
Posts: 5895
Joined: Thu Feb 26, 2004 1:58 pm
Location: Various networks. In the physical world I'm an adaptive AI that pretends to be human

Postby Wham » Wed Mar 15, 2006 10:02 pm

Excellent article. I agree with what the article says wholeheartedly. I also am with you LanJakal. I am a music lover. I have purchased many thousands of CD's, tapes and records over the years, but no more, I'm sorry to say. What's the reason the recording industry is missing out on my contributions? Simply put, it's their high cost and most of all the DRM crap they are putting on the CD's. If it weren't for the DRM, I would probably still be buying them.
Wham
 
Posts: 1193
Joined: Sat Mar 27, 2004 1:28 am

Re: Is the Physical CD Still A Viable Market?

Postby Freebird Mike » Wed Mar 15, 2006 11:05 pm

Article wrote:The NPD group feels there is enough internal strength left in the physical CD market and perhaps regain the prosperity witnessed in the late 1990’s.


Yeah, perhaps my Bre-X stocks will rebound to their 1997 value. :roll: To dreeeeeam the impossible dreeeeeeam!

Article wrote:By revolutionizing their marketing by appealing to established music buyers or the older demographic, which may require as little as just one more trip to the music store each year, the NPD Group estimates sales could improve 6%-8%. This marketing requires creativity, an integration of “brick & mortar” with digital services (such as create your own CD kiosks) and more discounts.


Nice bandaid solution - "just one more trip to the store this year, double that for the next year, quadruple that the following year, and for heaven sakes, don't die on us!!"

Doesn't the NDP group realize that integration of “brick & mortar” with digital services would most likely further promote digital sales of singles (you mean I can do this from home?!?) and not the more desired physical CD sales?

I'm sure more discounts is just what the recording industry wants to hear. I can imagine they stopped reading at this point.
Songlifter since 1999
User avatar
Freebird Mike
 
Posts: 292
Joined: Tue Jun 15, 2004 11:12 pm
Location: Left of the Atlantic

Sigh...

Postby tshort » Wed Mar 15, 2006 11:12 pm

Here's the problem, and it was discussed in some other article I read while back.

1. The economy has slowed down since 2000, thus we can assume one's entertainment spending money has either remained constant, or decreased.
2. There is so much more entertainment mediums competing for those dollars!

DVDs really started to hit their stride in 1999 (General availability was in 1998). PS2, Nintendo GB Advance and GameCube, and XBOX have all surged in popularity over the past 6 years. We only have so much money to spend on entertainment. People have shifted their purchases toward DVDs and video games (and PC games).

In the 90's when you went to buy entertainment, you had little choice. There were laserdisks, but they were expensive. Very few people bought VHS, it wasn't until DVDs were launched that the idea of a movie collection really exploded. Video games were really in a slump. Nintendo had it's NES, Super NES and N64. Sega was a minimal competitor to Nintendo. The Internet wasn't big yet, not everone was dying to get a PC on their desk. And then there were CDs. People were more likely to buy CDs.

The 1999-2001 timeframe changed everything. The internet had everyone buying a computer and buying games for it. DVDs became collectable. XBOX (11/2001) and PS2 (10/2000) showed how cool console games could be.

Our entertainment spending priorities have shifted, and the CD, once king of the hill, has suffered.
tshort
 
Posts: 1
Joined: Wed Mar 15, 2006 10:59 pm

Postby timmyfl » Thu Mar 16, 2006 12:46 am

tshort pretty much hit it right on the nose!. Also I think people need to take account that well most music sucks ass. Really it does. How some one like Nick Cannon has a career is mind bloggling( I like rap too).
Now some people may think I some old fuddy duddy but Im only 23 years old and I cant stand the radio or the regurgitated crap that they play on MTV.
User avatar
timmyfl
 
Posts: 98
Joined: Thu Sep 29, 2005 12:13 am

The question is permanence.

Postby lubczyk » Thu Mar 16, 2006 4:18 am

My question is whether flash drive like devices like the iPod and USB Flash Drives are permanent storage like CDs and Vinyl.

Yes, I know that Vinyl and Cassette Tapes deteriorate with frequent use but storage like CD's and Floppy Drives are pretty much pretty much permanenet. If kept in good condition the data on CDs, Floppies and the like should not deterioate for like 25 years. By that time you could put them on newer CDs and therefore in theory keep the data forever.

The thing is that USB Flash Drives and Hard Drives are not permanent storage. If left unused the data would deterioate and become unrecoverable over an extended period of time.

Let me give an example.

If you take one of your CDs (burned or original, doesn't matter). Put it in a dry shoe box and stuff it in your closet and don't touch it for say 50 years. Technically, you should still be able to play that CD in fifty years time.

The same cannot be said about Flash and Hard Drives. Their data deterioates over time.

If you put an mp3 on your hard drive and iPod today and put them in the back of your closet for 50 years. It is a good possibllity that their data would deteriorate and become unreadable after that 50 years time period.

Please correct me if I'm wrong in these statements for this is what I have been told.

Given that all these are true, we need to have a successor to the CD or DVD in order to keep our data permanent.

Holographic Storage Disc look promising in my opinion.
lubczyk
 
Posts: 17
Joined: Tue Feb 08, 2005 1:38 pm

Re: The question is permanence.

Postby DepecheNode » Thu Mar 16, 2006 5:10 am

lubczyk wrote:My question is whether flash drive like devices like the iPod and USB Flash Drives are permanent storage like CDs and Vinyl.


Who cares?

The only reason I keep my vinyl crates is;
    1. Most of my vinyl sounds better than the CD counterpart (VanHalen 1984 I listened to both just yesterday...) The vinyl just blows away the CD for rich, full sound.
    2. Sentimental reasons. Some vinyl pieces tie me to moments or places I like to remember (or forget...)

Who wants to keep shit for 50 years? Imagine you're in your early 20's... you'd be 70+. Do you honestly think you would want to listen to ANYTHING other than the weather channel or talk radio when you're 70?
User avatar
DepecheNode
 
Posts: 1497
Joined: Tue Jul 22, 2003 5:38 am
Location: On Your Ignore List

Postby swoosh » Thu Mar 16, 2006 6:02 am

Nice article Tom!
I've been reading the pdf and it's nice to read that NARM acknowledges that heavy users are also p2p users. I just hope that RIAA get's the hint and starts wondering what their probability is of losing an heavy buyer everytime they sue a "pirate". Just take LANjackal as an example. He's an heavy buyer but also a p2p user. If they sue him RIAA will get some money on short terms but certainly will lose income on the medium/long term.
swoosh
 
Posts: 73
Joined: Mon Jan 31, 2005 9:05 am

Postby Mortiis » Thu Mar 16, 2006 8:39 am

I buy about 20-40 cds a month depending on how flush I am that month. The minute it all goes digital that is the day I don't spend another penny on music.
Mortiis
 
Posts: 22
Joined: Thu Apr 14, 2005 11:28 am

Postby bkf » Thu Mar 16, 2006 12:05 pm

What Sony pulled could not have damaged the physical media markets more. It's fast quick and easy to get the same thing minus the dangers that physical media can provide in many forms. Oh well. Some day they will learn, today ain't the day, tomorrow ain't looking so good either. The brick and morter places should get their own suits going.

"Holographic Storage Disc look promising"

Only if it's not laden with all the BS or it to will die a slow death. I think you see through the posts on delays and pull backs this whole concept is not going over real big, nor should it. Hey it's their billions not mine. Don't hold you breath that they will see a dime out of me. What I got works very well Thank you. Woops what is that pop up? I think something just finished :lol:
bkf
 
Posts: 99
Joined: Wed Dec 21, 2005 1:28 pm
Location: Earth

Re: The question is permanence.

Postby cjules13 » Thu Mar 16, 2006 12:40 pm

lubczyk wrote:The thing is that USB Flash Drives and Hard Drives are not permanent storage. If left unused the data would deterioate and become unrecoverable over an extended period of time.

Let me give an example.

If you take one of your CDs (burned or original, doesn't matter). Put it in a dry shoe box and stuff it in your closet and don't touch it for say 50 years. Technically, you should still be able to play that CD in fifty years time.

The same cannot be said about Flash and Hard Drives. Their data deterioates over time.


My mp3 collection is currently backed up on DVDs. Once Blu-Ray or HD-DVDs become cheap enough and writable, I'll only need 2 or 3 discs to store a zillion albums. Do a couple more backups just in case and you're good.
User avatar
cjules13
 
Posts: 193
Joined: Thu Apr 29, 2004 7:35 am
Location: Shytown

Next

Return to Slyck News

Who is online

Users browsing this forum: No registered users and 3 guests

© 2001-2008 Slyck.com