Nu Math and the R.I.A.A.
I just love it when people twist their numbers around in order to make a point, it's even funnier when the press ignorantly goes along with the propaganda without taking a careful look at the numbers themselves. The latest example is the R.I.A.A., which in its ongoing battle with Napster has claimed in a round about way that their sales have declined because of fans stealing the music online**. The R.I.A.A. recently released their annual sales numbers and that claim doesn't add up unless you use nu math, which makes it possible for 2+2 to equal 37. But before we delve into the numbers lets take a look at the controversy that is Napster.
While I have reported on the Napster issue several times, I have never publicly taken a stand for either side. The truth is, I can understand the stance of both sides, and so I am split on the verdict of whether Napster is a good thing or not.
Personally I think of Napster as the modern equivalent of radio, it provides a platform for music to get out to the public. Radio these days is so market driven that fans only get to hear the "hit songs" which accounts for only a small percentage of the music that is released each year. Napster opens up the floodgates so to speak, so lesser known bands have the chance to get discovered by listeners. In that respect Napster is great. Then you have the bands or performers who don't need this exposure and fans download the MP3's so they won't have to pay for the CDs, in this respect Napster is bad. By the same token, fans could just as easily tape the same song off of radio or burn a copy of someone else's CD to avoid purchasing it for themselves. But I believe a great majority of people who discover songs they like from Napster do indeed go out and buy the full CD. This is evidenced by our unscientific survey on iconoFAN where we asked our readers if they have ever purchased a CD because they liked a song they heard on MP3. Over 80% said they have. So in that case, Mp3's have acted just like radio and inspired fans to buy CD's.
With that in mind, the best solution to the Napster problem may be similar to what they proposed to the record industry, which is a royalty model similar to radio. Each time a song gets played on the radio the publisher of the song gets paid a small royalty. Since, I believe Napster is the modern equivalent to radio it makes sense to employ such a royalty model. So every time someone downloads the song xyz by the band efg they will generate a royalty payment. However, these payments could get out of hand and end up costing Napster a fortune if the same payment amounts are used. Plus add in the fact that radio makes their money from advertising and Napster proposes a subscription model to generate revenue, the radio royalty type system would have to be majorly tweaked in order to work, but it can be done. For the artists that do not want their music traded on Napster, the company could employ the blocking filters they are now under court order to use, to keep those songs from being traded.
Now lets look at the R.I.A.A.'s claim that Napster has caused a 38.8% decline in CD sales. That is just not true. The 38.8% came from the decline in CD singles not full length CD's. Furthermore, CD singles only account for about 1% of the R.I.A.A.'s members sales. It is arguable that Napster has been a big cause of the decline in CD singles sales, but then you can also argue that the fans decided to buy the full length CD's instead of the singles. Look at sales of performers who would normally be big hits in the singles market like N Sync and Eminem, looking at the millions of full length CD's they sold, it is conceivable that fans opted to purchase the full CD instead of the one or two song single. Looking at Cdnow's Eminem catalog they have for sale a full length CD for $14.99 which contains 18 tracks. They also are selling CD singles for $5.49 which only contain 5 tracks. So it would make sense that fans would opt to buy the 18 track CD for a little more money instead of the 5 track single. Looking at the broader picture though, singles are pretty outdated to begin with, they date back to the days when music was sold on vinyl and single 45's sold for about 10% the cost of a full length LP. With CD singles they can cost almost a third of the cost of a full length CD. Wouldn't it make more sense for the record industry to discontinue singles and sell the single songs for a buck or two online as downloads? They would save a bundle on manufacturing, distribution and marketing which could translate into a windfall in revenue for the sale of digital singles.
As for full-length CD sales in 2000, they were up 3.1% from 1999. While this is a sharp decline in growth (1999 sales grew 12.3% from 1998) it is still an increase and the decline in growth can also be partially attributed to a slowing economy the relatively small number of "hit" artists in 2000. Was Napster a part of this decline? It could have played a part but we will never know for sure.
footnote: **(While they did not come right out and say this, the wording of their press release was done in such a way that it may appear the 38.8% applied to total CD sales. A few reporters did in fact read the release this way and included that assumption in their articles)