The RIAA and the Numbers Game

We've been hearing dire predictions from the major labels (and various commentators) about the trend of declining CD sales. It’s the excuse the RIAA uses for prosecuting real and imagined illegal downloaders in a willy-nilly fashion, and it's the mantra well-lobbied congresscritters cite as the reason for increasingly restrictive and intrusive legislation.

At the heart of the argument is an underlying assumption: the trend will continue in a straight-line progression. Such predictions are seldom accurate. Most trends tend to generate a curve rather than a straight line.

But let's give the RIAA their premise, and assume CD sales will continue to decline at a steady rate. Interestingly enough, there's precious little discussion in the RIAA camp of the trend in download sales. You'll see citations that download sales while rising, haven't made up for the losses in CD sales – leaving the unspoken assumption that they never will.

OK, but if the RIAA can assume that CD sales will continue to decline at a constant rate, why can't we assume that the rate of change for download sales remain constant as well?

The RIAA provides sales figures for various years, breaking out physical sales and downloads. According to their report, CD sales declined 13.8% in 2006, while downloads increased 74.4% in the same time period. Total digital sales represented less than 10% of the total for physical product, a fact which causes the RIAA to loudly gnash its teeth and dramatically rend its garments.

But let's play a little bit of "if this goes on" and see what happens – according to the RIAA's own numbers – if CD sales continue to decline and download sales continue to rise at their current rate.

For 2007 and 2008, things don't look so good. Both years show a net loss in revenue. Three years from now, though, total sales will be greater than 2006 (net gain). And by 2010, total sales will exceed those of 1996, those halcyon days when dinosaurs ruled the earth – er, I mean when CDs ruled the charts.

And look at what happens next. Six years from now, net sales will be double what they are today. And by 2015 projections show the record industry making 12 times what it does today.

According to our straight-line projections, the major labels will have two more years of (relative) famine before the money starts rolling in. And if these projections aren't realistic, then I invite the RIAA to provide better ones – but include both CD sales and download sales in the mix.

Apple iTunes sales just hit the three billion mark. It took two years to sell the first billion, a year to sell the second and six months to sell three. If this goes on, indeed!

How fast or slow will this change occur? That's up to the RIAA -- will it continue to buck the trend, or finally embrace the change?

- Ralph