Albums: Not Your Best Entertainment Value

kurt hanson 300wGary Slaight and David Farrell’s excellent daily newsletter about the Canadian music industry, FYI Music News, reported recently that the Canadian record industry sold 37.9 million albums (physical and digital combined) to Canadians in 2014. (The market shares for the various labels, if you care about that kind of thing, were Universal at 46.4%, Sony at 22.5%, independents at 18.8%, and Warner at 12.3%. By the way, about 2/3 of those purchases were CDs, with the other third being downloads. Well, plus a few thousand vinyl albums.)

Given that there are about 35 million Canadians, this apparently means that the average Canadian bought approximately one album in 2014. Yikes!

According to the newsletter’s calculation, the average price of that album was about $12. That makes sense; according to this page of the website, the average price of a hit CD ranges from $10 to $15 CAD.

These purchases, though, of course, are not evenly distributed across the population. Toddlers aren’t buying CDs; presumably senior citizens aren’t buying many CDs; and even in between, some people are bigger music fans than others.

Applying the 80/20 rule that generally works, in broad strokes, in situations like this, probably about 20% of the Canadian population buys on average about four albums per year, and the rest of the population buys an album very infrequently (e.g., perhaps as an occasional Christmas gift or impulse purchase at a Starbucks register).

This rate of album purchases per capita is down significantly from the glory days of the CD (i.e., 10 or 15 years ago). But the problem— the reason consumption is down — is nothing specific that the music industry is doing wrong.

It’s just that $12 can buy you a lot of entertainment elsewhere nowadays.

For example, let’s say you walk into Best Buy or log onto Amazon with money in your hand to treat yourself to some form of entertainment media.

What are your options?

lethal weaponWell, on Amazon, for $9, for example, you can buy a Blu-Ray DVD version of all four movies in the Mel Gibson/Danny Glover “Lethal Weapon” series. That’s about eight hours of video entertainment! Movies that probably had $200 million in production costs! That seems like a better value than the 40 minutes of a band playing music (sans video) on a CD, doesn’t it?

Or, for $42, you could buy all 4 seasons of the relatively-recent Fox TV show “Prison Break.” That’s almost 100 hours of entertainment at a cost of about 42¢ per hour. That seems like a excellent value when compared to CDs, where you pay about $20 per hour of content, there’s no video accompanying the audio, and you know the production costs were a lot lower than for an album.

And if you only have $12, there are plenty single-season shows that give you hours and hours of content at a very low cost-per-hour.

Alternatively, particularly if you’re in the younger end of the age range, you can buy video games that can give you dozens of hours of focused, foreground entertainment at a very low cost per entertainment hour.

Or, alternatively, for that kind if money, you could maybe buy a dozen apps for your iPhone.

My point is: Options abound!

That is why record sales are down.

It’s not piracy. There’s always been piracy. Remember the old “Home Taping Is Killing Music” campaign? Home taping was characterized as “piracy” too.

And it’s not necessarily bad A&R work or marketing on the part of the labels.

It’s just that the rest of the world has changed.

That said, there is a glimmer of hope on the horizon for the recorded music industry, I believe. And that’s the following three-step plan:

Step #1: Get consumers excited about music (and exposed to new artists) again via a vibrant online radio industry (e.g., Pandora, TuneIn, Slacker, Songza, AccuRadio, 8tracks, and others). The record industry should try to encourage it and work with it rather than milk it dry with royalty demands.

Step #2: Then, once more consumers are excited about music again, and have specific artists and albums they would like to hear more of on an on-demand basis, sell those consumers a music subscription service (e.g., Spotify, Rdio, Rhapsody, Deezer, or Beats Music), which gives them unlimited access to essentially every CD or MP3 in the world for the cost of buying one CD a month. That’s a good value.

Step #3: Finally, try to ensure that between listening to smartphones and tablets outside the home and the new generation of high-quality wireless speaker systems (e.g., Sonos, Bose, and Samsung) inside the home, consumers will once again be enjoying music as a key element of their lives.

This is not an innovative new insight on my part; it’s been a basic underlying theme of RAIN News and RAIN Summits for years.

But if consumers are really down to buying one album per year, then, yikes!, I think it’s worth reiterating.

Kurt Hanson