Indie Music- Alternative Demand Factors.
Personal income is nearly always a demand factor worth discussing, especially in the case of goods that fall outside the realm of necessity. Historically, in the case of indie music, the recession of the early 80s serves as an example of its possible tie to sales. Real GDP actually experienced a slight decrease from 2001 to 2004. A decline that averaged less than a percentage point, though, might not be strong enough to suggest a pivotal role in the severe downward trend that occurred in record sales leaving piracy as the most likely contributor of the early 2000s. Similarly, an average rise in GDP slightly less than 2% in 2005 and 2006 could certainly have aided in flattening the steep decline of record sales, but might still take a back seat to technology-related factors.
From 2007 to 2011, per capita GDP fell by an undeniably significant 6% coinciding with a drop in record sales by value of 47%. In this case, it seems that GDP could have played a relatively significant role in changes. Consumers, who had already started moving towards singles, were even less likely to purchase the more expensive formats when their income was significantly reduced. In this way, the Great Recession of the late 2000s could have accelerated this aspect of the Internet’s impact. As discussed in my blog Indie Music-Historical Movements in Record Sales, from 1973 until the turn of the millennium, value of indie music record sales saw a nonlinear average growth rate slightly below 3% with the most notable dip coming from 1979 to 1985 followed by its largest upsurge between the years of 1986 and 1994. Since only physical indie music was available until the early 2000s, it naturally equals Total Sales in the 20th century. The decline from 1979 to 1985 came at a time of economic recession in the United States when per capita GDP income saw slow to negative growth until 1983. Although there were likely other contributing factors, consumers are less likely to spend excessively during recession. Possibly in response to the lowered demand, the price of audio products also saw a rare decline from 1982 to 1985. Despite their lower prices, value of record sales fell by nearly 20% from 1979-1985.
Within the discussed literature, we saw several studies that discussed both the prices of music, indie music and other forms of entertainment as possibly relevant variables to record sales. In general, a downward trend in the prices of substitute products, video discs and computer software has been noticed. Meanwhile, sale of audio products saw an increase, with the exception of a less than 1% decrease in 2002, until 2005 before it declined back to a level well below that of 1998.
The oppositional movement of the price of audio products and potential substitute entertainment goods in the late ‘90s and early 2000s could have led to consumers choosing cheaper, alternate forms of entertainment over audio. Additionally, it may have increased people’s willingness to download songs illegally when the practice became convenient and commonplace. As discussed in my blog Indie Music-Trends 1, the rise in the Internet as it pertains to illegal piracy and legal digital distribution, undeniably played a major role in the massive shift in consumer preference by providing them the means to easily access individual songs without even stepping out of their front door.
Between the years of 2004 and 2011, though, the effects of the Internet on the recording industry cannot be limited to piracy and the introduction of legal distribution. Several aspects in the rise of social media make it another key element represented by the rise of the Internet. Using social media outlets, artists have begun to release free music directly to their fans, a practice that, although helps promote acts and expand their fan base, probably has mixed results in terms of record sales. Music released free of charge can be seen as sampling for upcoming works for sale, potentially uplifting record purchases. One might expect that an industry struggling with a transformed demand schedule might lower prices to adjust to the market. It was not until 2006, though, that prices for audio discs and other media began to fall. It is possible that the nearly 15% drop in prices came as a result of illegal piracy’s toll, the rise of digital sales, which are generally cheaper than physical ones, and the Great Recession.
Although descriptive data cannot fully capture these complicated inter-relationships, it offers a base off which we can begin further analysis.
In my next blog I am going to write more about the impact of internet on indie music business as a whole. Please share your experiences and I will add them to my future blogs.
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