RIAA statistics. Fact or fiction?

By Jon Newton 9/20/03

"It's as if journalists are prepared to accept assertion as fact, and not even eyeball the RIAA data themselves."

That's an observation in Richard Chirgwin's September 19 LOCAL DATA DOESN'T SUPPORT RIAA CLAIMS in Australia's CommsWorld.

Last week, Chirgwin took a look at RIAA data because to him, they seemed "consistently mishandled".

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"Since the data is on the RIAA Website, it's pretty lazy not to even run off a copy. Especially so when journalists favour the sensational over the mundane. When you're writing about the terrible threat of piracy, it's so much better to print the scary (and inaccurate) claim that US sales have fallen 25% in four years (I'm looking at the RIAA numbers, and I reckon whoever said that to the Herald needs new calculator batteries)."

Quoting from the ARIA (Australian Recording Industry Association) media release, "2002 saw a 4.4% fall in volume in the Australian market and an overall 4.5% average wholesale price reduction," he says.

However, that covers every product type in the Australian market; CD singles, DVD singles, vinyl. Everything. And the numbers take in 10 categories.

But, says Chirgwin, "Restrict the count to 'new media' and the numbers are much, much more revealing.

"Sure, CDs fell; but at the same time, the music-on-DVD sector went nuts, going from fewer than 2,000 units to more than 100,000.

"To put this picture, I've just aggregated three categories CDs, music-only DVDs, and music video DVDs.

"By that measure, volume sales slipped only a small amount 2.2% across the sum of the three sectors while value fell 4.77%. (The numbers: 2001 volume was 50,632,586 units; 2002 volume was 49,513,822; 2001 value was 595,673,093; 2002 value was 567,255,871).

"DVDs are nearly twice the price of CDs, though so the volume, I would argue, isn't that far off a straightforward replacement. Someone who buys a Britney Spears music video DVD doesn't buy the CD as well.

"But what about the decline in value? Between 2001 and 2002, the income these three sectors generated fell by nearly 5%. Isn't Australia on the same slippery slide as America?

"Not quite. A year-on-year comparison in Australian dollars ignores one important datum.

"Most of our CDs are imports, paid for in American dollars."

With that in mind, in 2001, the Australian dollar went declined relative to the American dollar, and it stabilised in 2002, says Chirgwin. "Grabbing some ABS numbers, I find that the average exchange rate for H2 2001 was 51.5c US; in H1 2002, it was 53.5c US. That's an appreciation of 3.88%."

Currency movement, in other words, accounts for a huge amount of the change in market value as much as 80% - and the Australian industry got a lot of leverage out of the appreciating dollar, he states, and was in fact able to recover 80% of the cost of discounting with a stronger dollar.

"With currency movement taken into account and I admit that exchange rates deserve deeper scrutiny than I gave them here the local music retail sector outperformed America by a huge margin," he points out. "As PlayStation 2 and X-Box were grabbing the consumer dollar, the music sector lost only marginal amounts of sales, either by volume or by value.

But, he emphasises, one segment is noteworthy because it's the most direct target for the download: "CD singles lost nearly 20% of their value.

"Were ARIA to blame the shift in the singles market on downloading, I would be hard-pressed to argue but CD singles are a small segment of the market. Most consumers probably don't buy them at all, because they don't see them as value-for-money. (DVD singles have been completely wiped out, which is no surprise at all: they were probably a dumb idea in the first place)."

Chirgwin believes the 2003 year-end figures from ARIA will be very interesting indeed.

(Thanks for the pointer, gilbd : )


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