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CD sales fall disguises a lack of choice

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While music consumers in Australia patiently wait for the introduction of iTunes, they find they have less choice than ever.

The Australian Recording Industry Association has reported that for the first six months of 2005, the volume of recorded music product shipments to retailers fell 7.54 per cent, while their wholesale value fell 11.82 per cent.

ARIA attributes the fall to a number of factors including the impact of charitable appeals following the Boxing Day Tsunami, and subdued general retail activity.

These factors may be relevant, but a study of the new release patterns by the larger Australian record companies found that the number of CD albums, singles and music DVDs released by Australia’s largest record companies has fallen by a third over the past two years. The number of albums released fell nearly 37 per cent and the number of singles releases dropped 44 per cent over the same period. Music DVD releases increased by 17 per cent over the same period. The fall in new releases was most pronounced from 2003 to 2004, but the first six months of 2005 there was a further decrease in major label new releases, especially new release singles.

This analysis is based on new release information included in ARIA’s weekly ARIA Report, and provided by the four “major” record companies plus independent Festival Mushroom. The analysis compared CD releases for the first six months of 2005, to the first six months of 2004 and the first six months of 2003.

This analysis demonstrates a continuing major reason for the decline in sales in the Australian market – a reduction in choice for local consumers. When consumers can’t find the CDs they look for other content like games or DVD films, which continue to sell heavily, and of course they buy CDRs and download tracks from the internet. Sales of digital music players also continue to boom in Australia.

ARIA’s mid-year sales figures also surprisingly do not include authorised digital music sales. ARIA say: “The first half figures do not include digital music sales, including emerging sales of ‘mastertone’ ringtones. To date, comprehensive information regarding the value nd (sic) volume of the digital music market has not been available to ARIA . Initial reports suggest that this sector of the market is still relatively small.”

This is surprising. Digital download sales figures are included in international sales figures. For example, RIAA in the US includes the value of digital singles and albums in its six-monthly and annual sales figures. Download sales don’t count towards the ARIA singles and albums chart, and unlike the US and UK there are no stand-alone download charts.

Websites that make tracks available as authorised downloads should be central to the business models for record companies in Australia and overseas. When record companies make tracks available as paid downloads they don’t have to worry about artwork, packaging such as jewel cases, physical delivery, or traditional retail concepts like sale or return. There is no reason why many more tracks can’t be released by the majors as paid downloads – even if in some cases there is no equivalent physical CD released. A large number of digital download exclusives could be just the thing to boost choice for consumers, while they help develop the existing authorised services currently provided in Australia. These paid downloads could then be included in Australian new release data and in the official sales figures.

While Australians await the introduction of an iTunes service in Australia (this thing is starting to take on a Messianic feel), record companies need to embrace new business models and look towards the future. There is nothing to be gained by record companies and technology companies battling over the minutia of licensing deals, while recording artists continue to lose sales royalties, and music consumers continue to lose patience. ®

Alex Malik is a lawyer, music industry commentator, and academic researcher at the University of Technology in Sydney. He can be contacted at Alex.Malik@student.uts.edu.au.

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