The Rise And Fall Of The RIAA

from the predicting-the-end dept

We recently had a post questioning whether the RIAA's legal campaign was a success or not. It seemed like there was plenty of evidence that it has been an incredible failure. Separately, we had a post about Radiohead's Thom Yorke, suggesting that the major record labels were going out of business in a matter of months. While we felt that was a bit of an exaggeration, one of our commenters, Ccomp5950 compiled data on RIAA label sales, along with some helpful notes about what other factors were going on at the time:
Year: $ in Millions
1992: 9024
1993: 10046.6 (CD players started to get more affordable towards mid-year)
1994: 12068
1995: 12320.3
1996: 12533.8
1997: 12236.8
1998: 13723.4
1999: 14651 (Work made for hire controversy)
2000: 14404 (Napster sued into bankruptcy)
2001: 13700 (Ipod came out October 2001)
2002: 12,614.2 (Price Fixing lawsuit hits RIAA)
2003: 11,854.4 (Grokster lawsuit, "induced infringement" introduced) (Mass lawsuits by RIAA start(AKA: The education campaign))
2004: 12,345.0 [Revenue Physical / Digital] (BMG gets out of the music business, sold to Sony later on: Big 5 becomes Big 4 for RIAA)
2005: 12,296.9 [91%/9%]
2006: 11,758.2 [83.9%/16.1%]
2007: 10,370.0 [77%/23%]
2008: 8,768.4 [66%/34%] (RIAA declares it's going to stop mass lawsuits with member money problems and EMI almost bankrupt)
2009: 7,690.0 [59%/41%] (Massive layoffs hit RIAA around Febuary: Blames piracy)

Sources: (statistics from 90's to 2001) (Statistics for 97 to 2007) (2008-2009)
It's a great list, but I felt it could be even more powerful as a graph, so I just threw the following together, based on the info above:
And, that, right there, does a nice job painting a picture on the decline and fall of the RIAA and the major record labels. A few points are worth highlighting:
  • If you're not familiar with the "works for hire" scandal, you can read the full background here. Basically, a Congressional staffer by the name of Mitch Glazier snuck a tiny unnoticed amendment into a much larger bill in the middle of the night -- supposedly at the request of the RIAA -- without telling anyone. It effectively changed the definition of music recordings into "works made for hire," which was really important, because it meant the RIAA labels could hang onto musicians' copyrights for much longer, avoiding termination rights that let musicians reclaim their copyrights. Just a few months later, Glazier left his low-paying Congressional staffer job for a $500,000 job with the RIAA, which I believe he still holds ten years later. Thankfully, people quickly recognized what he had done and Congress had to go back and fix Glazier's sneaky wording. However, it is worth noting that the peak of this chart is right when Glazier inserted his infamous four words.
  • As we discussed last fall, now that musicians do have termination rights, they're lining up to use them and take their copyrights back from the labels. They can start getting the copyrights back in 2013. If you're looking for a date when the bottom totally falls out for the RIAA labels, that may be it. When the rights to their back catalog starts to drop out, this chart looks even worse. The RIAA won't give up easily, of course. The latest stunt they're trying to pull is to "re-record" albums, claiming that it creates a brand new copyright, that gives them another 35 years before termination rights are applicable. That is, of course, ridiculous, but the RIAA will likely try to fight it out in court for many years to extend that 2013 deadline by a few more years. Of course, all that money on legal fees could have gone to innovating, but that's just not the RIAA way.
  • Note that digital music sales is not even close to being a savior. The total is still dropping rapidly.
  • Of course, many have argued that the rise and fall may have a lot more to do with CD replacements of previous formats -- and this chart certainly suggests that could be an explanation. The big jump happened right when CDs became affordable, and people needed to go out and replace their vinyl and cassette (and 8-track!) collections. After a few years of that, it makes sense that the market should drop anyway.
  • Once again, it's important to point out that the chart above is not the entire music industry, but a limited segment of it: the RIAA record labels, mainly comprised of the big four record labels. It doesn't take into account all of the other aspects of the music business -- nearly every single one of which has been growing during this same period. It also doesn't take into account the vast success stories of independent artists and labels doing creative business models and routing around the legacy gatekeepers.

Filed Under: record labels, recording industry, sales
Companies: riaa

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  1. icon
    Donald (profile), 11 Jun 2010 @ 12:44pm

    A different perspecitve on sales

    I used to buy a lot of CDs. Indeed, over the course of the past 25 years I have easily reached a thousand CDs. However, my buying habits changed in the late 90's because I felt that I was getting ripped off. I would go out, spend $20 on a CD and enjoy one or two songs. To be honest, the groups being promoted by the big record companies could not produce an entire album of good songs if their life, or the life of the RIAA, depended on it.

    Fast forward to the digital age and, until recently, this was still very much the case. iTunes made a fundamental change in the buying habits of consumers. Instead of purchasing an entire album for $10 the consumer now had the option of buying the two songs they wanted for $2. The fan is still getting what they want but at a fraction of the cost of what it was previously.

    Indeed, if you take this into account you see that the numbers the RIAA has painted are not that bleak after all. Let us "convert" digital sales into physical sales. If people only want two songs out of an album of ten, then to convert the digial sale to a physical sale you would multiply by five. Or, to put it another way, if digital sales were not available the music fan would need to spend $10 to get the two songs they want instead of $2. Using this metric (and a few minutes in Excel) you see that the "music industry" has continued to grow in recent years.

    People are still buying the songs they want, but they are buying less fluff and this is where the RIAA has a problem. They produced fluff to pad the good stuff. Now that digital downloads are available the fluff no longer sells.

    Perhaps the real failure, is the failure of the RIAA supported bands to produce an entire album of good music? I do know that of the last 10 albums I have purchased not a single one has a contract with a major record label and, in my mind, virtually ever song on every album is worth listening to and paying for. Have we reached the stage at which the consumer is able to make more decisions concerning what they need to purchase in order to enjoy a few songs?

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