Reports of the Death of the CD Are Greatly Exaggerated

A few weeks ago, several minor online media outlets ran with the dubious story that the major labels plan to eliminate the production of CDs by the end of 2012.

This claim originated at Side-Line, an online music magazine that appears to be committed to sloppy journalism and even sloppier writing. In an article that reads like it was dictated into faulty speech-recognition software by Ali G, the author refers to the major labels’ alleged plan to stop selling CDs as “a move that makes completely [sic] sense.”

Never mind that CDs are still the biggest money-maker in recorded music according to the Recording Industry Association of America, this shoddy story spread through forums and Facebook statuses around the world, creating a small brushfire of misinformation on the web.

Although most savvy readers were able to see through this un-sourced and irresponsible article, its basic claim continues to crop up often enough that its about time we officially debunked it.

The Present and Future of CD Sales

While there’s no doubt that the CD will eventually go the way of the wax cylinder, 2010 sales of the medium amounted to nearly 250 million units and $3.5 billion in revenue in the US alone. Put simply, there’s no reason to suggest that CDs will completely disappear from the market anytime in the next few years, much less in 2012.

Although CD album sales have continued to decline at a rate of roughly 20% each year, they have yet to be surpassed by all digital downloads combined.

Album downloads weighed in at a paltry 83 million units in the RIAA’s most recent report, representing growth of a little more than 8% and generating just $830 million in revenue, roughly a quarter of CD revenue. For their part, single-song downloads have increased by 12% in the past year, but with US revenues of $1.3 billion per year in 2010, they have yet to reach half the income generated by CD sales.

Even in an extreme scenario, assuming a continuation of the 2010 rate of growth in downloads and rate of shrinkage in CDs, it would still take album downloads until about 2015 even to equal a newly decimated level of CD album sales. Using the RIAA’s current figures, in 2015, album downloads will have grown to nearly 127 million units, which would still amount to just half of the level of CD sales in 2010. Even at a continued growth rate of nearly 10% per year, it would still take album downloads an additional 7 or 8 years to equal even today’s relatively low level of CD sales.

If CDs continue at the rapid rate of shrinkage they saw in 2010, it would still take them until 2015 to shrink to 80 million units sold in the US. And at that point, they’d still outsell vinyl records by a factor of 20. However CD sales have not shrunk in 2011 so far. In fact, they’ve grown.

According to reports from September, “With nine months of 2011 down, album sales stand at 228.5 million, according to Nielsen SoundScan — up 3.3% from the 221.1 million albums sold in the corresponding period of 2010.”

The Future Of Music Sales

It’s clear that CDs are not the future of music, and that the format is on the border of irrelevance among young people who live in metropolitan areas and really like the internet. However, it’s likely that you can expect to see them in stores for some time to come.

It took quite a while for VHS tapes to be completely replaced by DVDs in retail markets, especially outside of major US cities. I remember raiding going-out-of-business sale at a suburban local Coconuts and walking out with armloads of deeply-discounted new VHS tapes as late as 2007 — a full 12 years after the invention of the DVD. (This month, expect that I’ll be watching my VHS copies of Scrooged, Groundhog Day and Nightmare Before Christmas if I can find the time.)

And as for vinyl? Its share of the market is increasing at a record rate. Sales of 12” and 7” releases grew from 3 million to 4 million by the RIAA’s last published count, even as their prices increased, shooting vinyl revenues up 44% to $87 million. Don’t be surprised if some of the new buyers aren’t even listening much on the format. In many cases, music fans just want a satisfying physical souvenir.

More substantially, much of the recent growth has been come from apps, subscriptions, and licensing.

Now that most young people have free or affordable smartphones, ringtone and ringback sales have decreased by nearly 30% in 2010, a rate far faster than CDs sales. Although the RIAA doesn’t carry statistics on musical apps, it’s likely that apps sales are quickly replacing, or even causing, the fading ringtone market.

Meanwhile, enrollment in paid music subscription services increased by nearly 30% the same year. Although the total number of US subscribers was overshadowed even by the sale of vinyl records, remember that the latest complete statistics from the RIAA are for 2010, a period that ended a half a year before Spotify was released in the States.

By the end of 2010, US users of all available subscription services were estimated 1.5 million. Don’t be surprised if that number grows by as much as 50% when RIAA’s final numbers for 2011 become available. As of late November 2011, Spotify had earned 2.5 million paying subscribers worldwide, an increase of nearly 1 million paying subscribers since they launched in the US this summer. Some of these subscribers may have left other services to join Spotify, but many among them are completely new users.

And it’s not just the number of listeners that’s growing – it’s also the integrity of artists’ contracts. According to the RIAA’s 2010 report, “Distributions for digital performance rights, which include payments to performers and copyright holders for webcasting, satellite radio, and other non-interactive digital music services, increased 60% to $249 million in 2010. Performance revenues represent an increasingly important piece of the music industry landscape as fan interest grows in digital listening and access formats.”

We’ll be sure to provide a full analysis of the RIAA’s new numbers for 2011 as soon as they’re available. But until then, bear in mind that reports of the imminent death of the CD may be greatly exaggerated.

Justin Colletti is an audio engineer, and a journalist who writes about the techniques, economics, and aesthetics of music and sound.

Editor’s note: Since we began our campaign to debunk the Side-Line article a few weeks ago, the magazine has updated its story to admit that they have no official, or unofficial sources for their 2012 timetable.

This entry was posted in All Stories, December 2011, Featured Stories, Industry Trends, Rants and Raves. Bookmark the permalink. Both comments and trackbacks are currently closed.
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