Indie Music-Historical Movements in Record Sales.
Before delving into a deeper empirical approach, an updated look at the basic trends within indie music record sales can help us formulate some initial hypotheses about its relationship to the rise in the prevalence of the Internet. The invention of internet has had many direct and indirect effects on the music industry – both good and bad. This article is a part of a larger article about the evolution of the indie music industry. You can read more about this in my blog Indie Music Industry. I will follow up with a new article about indirect effects of internet on the music industry. If you have been following my previous articles on Research Models, by now you should have a good understanding of the fundamentals. It might be wise to re-read those articles, or bookmark them to grab back whenever you encounter a subject that I have written about!
Here, I turn focus to record sales in the 21st century as they relate to increases in Internet availability, and speed, utilizing the historical background for analysis. Finally, I will explore additional demand factors that may have contributed to the decline in sales during the 2000s.
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.
During the 8-year span from 1986-1994, real value of record sales showed unprecedented growth at an average of over 9% a year. A recovering economy surely helped boost sales, but this increase may likely be largely attributed to the change in format to the compact disc. As discussed in my blog Transformation of the Indie Music Industry, 1981, Sony, in collaboration with Philips developed the compact disc and surpassed the sale of records in less than a decade. Being the first widely used digital format, the CD earned a lot of money for the record labels before their soon-to-come doom. Recording companies arbitrarily raised the prices of CDs, justifying it with high quality of sound and establishment costs for the facilities required for the new format. While the matured and streamlined process of manufacturing and shipping CDs was far cheaper than the cost of records, the labels continued to charge higher process for CDs. Transportation and storage expenses of recording companies largely reduced due to the inherently economical production system of CDs. They were lighter and dimensionally smaller than records and therefore required little transportation cost and lesser storage space in stores and warehouses, not to forget that their smaller size led to reduced manufacturing costs. Yet, the record companies continued to charge high prices with reduced expense.
Despite the fact that the manufacturing process had likely been standardized by 1986, the market may not have adjusted fully to the lower expenses incurred by suppliers, whose producer surplus elevation is evident by the increase in the value of their record sales. The rise of the CD format surpassed all other formats by value in 1991, ten years after its introduction. Interestingly, an alternate perspective looking at units shipped, shows CDs actually do not surpass other formats in terms of units sold until 1993. This once again points to the relative high price of compact discs during this time.
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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