The Real Culprit For The Decline In Music Sales? Video Games

from the it-ain't-piracy dept

Mon, Jun 15th 2009 12:58pm — Mike Masnick

Last week, I did yet another presentation at a music industry conference (hoping to get video of it), where one of the points I raised was that competition from things like video games has been one of the major competitive market elements that the recording industry never seems willing to recognize, when it talks about its declining sales -- instead, always insisting that "piracy" is to blame. Yet, Charles Arthur looked at some of the numbers in the UK and recognized that if one assumes that discretionary spending on these sorts of things remains about equal, it certainly looks like the decrease in music purchases has simply been replaced by video game purchases. In other words (once again) this is a business model issue. The recording industry hasn't give people good reasons to buy, while the video game industry has.

Related to this, by the way, is that this shows what a lie it is for the recording industry to insist that hundreds of thousands of jobs are "lost" and millions in tax revenue goes missing because of its losses. If, for some reason, people continued to spend as much on music, then it's likely that the video game industry would be smaller, and the job "losses" would be there. In other words, those job "losses" in the music industry almost certainly turned into job gains in other sectors (which somehow never make it into those reports). And the "tax revenues" likely remain about the same, as the greater taxes paid by the video game industry make up for the smaller tax bill in the recording industry.

Now, this is a rather simplistic study of things, and a much more detailed study could be done to support the shift in consumer preference. But the simple claim that all of these losses are due to "piracy," rather than other competitive forces, has increasingly come under serious doubt.

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Filed Under: competition, declining sales, music, video games

46 Comments

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Anonymous Coward, 15 Jun 2009 @ 1:15pm

Whew! I thought it was something else...
And all this time I thought the culprit was overglorification of the act of procreation brought on by the music business.

After all, the market demanded ED prescriptions, and these businesses have well outpaced the music business and their crappy lyrics. Thank goodness we can finally put that theory to rest...
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Steve R. (profile), 15 Jun 2009 @ 1:20pm

Market Saturation
Many people have pointed out that we have many more options regarding entertainment. As you point out, listening to music may be replaced by playing a video game. Another factor I think is market saturation, you can only listen/play so much. After a while, you don't know where to store all that stuff and you may not even be able to find it, even if you want to hear/watch it.

Last night we happened to have cruised through Best Buy's DVD bargain bin. There were several DVDs that we would have liked to buy, at really reasonable prices, but we didn't. Were numbed out.
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chris (profile), 15 Jun 2009 @ 1:25pm

gamers... pirates... it's all the same
gamers and pirates are both young internet savvy people, and at the end of the day, it's being young and using the internet that is destroying movies, television, newspaper, music, radio... you know, america.

so you crazy kids with your intenets and xbox hulus! get off my lawn and stop using the intertubes! get a haircut and buy a newspaper and some CDs already!
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Rebel Freek (profile), 15 Jun 2009 @ 1:36pm

Re: gamers... pirates... it's all the same
[sarcasm] The newspaper? Why would I buy news about something that happend yesterday when I can get free online yesterday? Oh yea, the corporate dinosaurs need to make a living too...[/sarcasm]
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Anonymous Coward, 15 Jun 2009 @ 1:47pm

People are not listening to less music, they just are not paying for it.
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Carl Fredericksen, 15 Jun 2009 @ 1:50pm

Re: gamers... pirates... it's all the same
Chris you reminded me of something... Remember several years ago when Sony had an "Amnesty Program" and then as classy as they were, they decided to go out and sue people who claimed Amnesty? I wonder if internal pressures at Hulu may cause them to cave.

So I buy my TV shows by season thru iTunes, mainly so I can use my DLO HomeDock HD (Real cool) and AppleTV on the bigscreen. Front Row runs on my computer too.

Point is, Hulu competes with these pay options, which are just not well thought out or intergrated. If they go "Pay" or subscription based, it will indeed be more than just a little baffling. Just check out some of the 1080P trailers in full screen on Youtube and you'll see where this monster is going.
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LostSailor, 15 Jun 2009 @ 1:57pm

"Study measure expenditures, not consumption"
Apples and oranges, Mike. What I would take away from this study, and the author make the point but kinda glosses over it, is that the rise in sales of video games may be due to music piracy: if money available for discretionary spending remains constant, and one can get the music for free (if illegally), then one has more money to spend on video games.

From the consumer point of view, consumption of music may not have decreased (and may have increased) but spending has been freed up for buying video games.

So your headline should really read "Music Piracy Boosts Sales of Video Games."

While I agree that you can't put a one-to-one ration of illegal downloads to lost sales, there is a point--probably impossible to accurately determine--where some portion of downloads equals lost sales. That is some part of the volume of illegally downloaded music represents music that the consumer would have paid for if there were no illegal means to obtain it. Which is why that money may be flowing to video games (or DVDs or beer for that matter).
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Ima Fish (profile), 15 Jun 2009 @ 2:04pm

So your headline should really read "Music Piracy Boosts Sales of Video Games."

But you're presupposing your conclusion. First you have to show proof that music piracy is hurting the sales of music. Studies have shown the opposite. The most downloaded music is always the best selling music and pirates buy the most music.
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Anonymous Coward, 15 Jun 2009 @ 2:07pm

Re: "Study measure expenditures, not consumption"
"...the rise in sales of video games may be due to music piracy: if money available for discretionary spending remains constant, and one can get the music for free (if illegally), then one has more money to spend on video games."

A theory that sinks to the bottom of the ocean when you realize that you can pirate video games too. Why would pirate music and buy games when you can just pirate both?
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Anonymous Coward, 15 Jun 2009 @ 2:12pm

Re: "Study measure expenditures, not consumption"
You make a valid point but I think Mike's agrument makes sense as well as even if music could not be obtained for free, a consumer with $100 per month to spend on entertainment has to decide how to spend the $100 and these days music has much stronger competition than it did 10 or 20 years ago.

Also, 15 years ago, if there was a CD I wanted with only 2 songs I liked, I might have paid $15 for the CD when today I could just buy the two songs for $2. Being able to buy music a la carte has allowed people to spend less on music since you no longer have to buy the filler.
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B, 15 Jun 2009 @ 2:14pm

Re:
[Citation Needed]
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LostSailor (profile), 15 Jun 2009 @ 2:16pm

Re: Re: "Study measure expenditures, not consumption"
As the article Mike linked to noted, not all video games can be pirated (though clearly many can). I would also point out that music is generally easier to copy.

Then again, as Mike is fond of pointing out, perhaps the gaming industry has given gamers a "reason to buy".

The theory is fine, BTW. I never said that this is what is happening, just that it is a plausible explanation of the numbers.
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Anonymous Coward, 15 Jun 2009 @ 2:16pm

Re: Re: "Study measure expenditures, not consumption"
No kidding. Hmmm $1.29 for the latest Green Day track or $60 for HaloWorldofWarCraftMario. I think I'll apply the buck and quarter to my $60 purchase cuz I are a right smart consumer.

Schmuck. If you take the time to pirate a track to save a buck you will certainly spend the time to save $60.
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PlagueSD, 15 Jun 2009 @ 2:21pm

Re: gamers... pirates... it's all the same
"so you crazy kids with your intenets and xbox hulus! get off my lawn and stop using the intertubes! get a haircut and buy a newspaper and some CDs already!"

You forgot the part about pulling their pants up.
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Anonymous Coward, 15 Jun 2009 @ 2:24pm

Re:
I have to think that internet radio and satelite radio negatively effect music sales. Many people who use these services probably don't see the need to own the music when the have constant access to new music.
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Anonymous Coward, 15 Jun 2009 @ 2:35pm

Re: "Study measure expenditures, not consumption"
I tend to think opposite.

Music Consumption *is* a form of Entertainment. However, the landscape and very definition of Entertainment has changed. I imagine you, Lost Sailor, post here because it presents a sort of entertainment. This displaces consumption time that would normally be reserved for, say music consumption.

However, the very act of music consumption, inclusive of the consumer mindset of the "Thrill Of The Hunt" as the ideal customer (certa 1990s) would involve multiple steps: get in the car, go to a local BestBuy or whathave you, spend 1/2 a day looking thru an immense catalog for 5-10 CDs they really want. This entertainment activity has really, and fundamentally changed where the consumer doesn't even need to leave their home anymore.

Today, people are buying less, recomending more, and buying based on user and other consumer recomendations.

In fact, If I had to venture a guess, I would imagine that most iTunes (et al) purchases occur between the hours of 8pm and 3am.

Normally, this would have been clue number 1 that a fundamental change to the "ideal" customer demographic changed. If I recall, the 1,000,000,000 iTunes purchase was accomplished at some time ungodly hour like 1:00am.

But instead, the industry keeps banging this damned piracy issue like a dead horse when the most fundamental question... "When do my customers buy my product" is seemingly overlooked by the industry as a whole.
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Anonymous Coward, 15 Jun 2009 @ 2:51pm

Re: Re: Re: "Study measure expenditures, not consumption"
True, piracy on consoles is harder -- last I knew you had to solder some dubious piece of silicon into the thing to make it work. But if you're someone who's in the habit of not spending money on things, why bother with the console at all? Go back a generation or two, and use an emulator.
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Fred, 15 Jun 2009 @ 2:59pm

Come on people keep buying video games, that's our only hope!

As for iTune time of purchase, it's probably 1 AM Cupertino time... The world is round :p
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Anonymous Coward, 15 Jun 2009 @ 3:02pm

What is Kia doing?
I recently saw a national KIA ad where they will give something crazy for like up to $500 a month for talking about and recommending Kia. Must be new or in test, because I can't find a link anywhere.

What a novel idea. We could probably learn a lot from them. Of course, I think their marketing department may troll around the blogs. Those smart, silly Koreans.
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Anonymous Coward, 15 Jun 2009 @ 3:05pm

It is much harder to pirate video games for consoles than it is to pirate music. So the "young folk" steal the music and pay for the video games.

If it was easier to steal console games, trust me, they would do that too.

Actually, during the same period, the price of gas also went up. So it could be said that music sales have suffered because of an increase in the price of gas. Nothing like a misleading study that attempts to make the data fit it's answer.
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Anonymous Coward, 15 Jun 2009 @ 3:14pm

When new video games become easy to illegally download, the video game industry will be in the exact same predicament.
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Anonymous Coward, 15 Jun 2009 @ 3:17pm

Why can't you admit that you don't know any more than the music industry?
Mike, seriously, can't you see that what you are offering is as much guesswork as the music industry. If people had to pay for their music and still chose video games, you'd be 100% correct, but, because people find it so easy to steal music, they don't have to make that choice.

The problem with all of your business model theories is that people may or may not value what you have to charge for. For example, if I wanted a new CD and video game, had to buy each, but could only afford one, I might choose the CD. Now, if, per your business model, the music is given away for free so they can advertise for other things (the live show, t-shirts, whatever) I get the CD for free. Now with the money I have left over I can either go see the band live, buy their t-shirt, or buy the video game I wanted. Since I got the CD for free (which I would have rather had than the video game in the first place), instead of spending the rest of my cash on more music related items, I'll go spend it on the video game. There, the music industry lost money because of piracy.

Can I prove how often this happens? Of course not, no more than you can prove that the loss in music industry revenue is because of something other than piracy.

And for those who claim to pirate because of some protest against the music industry and RIAA, why not do this: Don't use their product at all. Don't buy it, don't pirate it, don't listen to it. Then you'd be sending a message, and it'd be a better message than "I'm to cheap to pay for music so I'll just take it."
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BigFN-J (profile), 15 Jun 2009 @ 3:28pm

orly?
AGE
3-9 Money spent on popsicles & candy from the icecream man

9-12 Money spent at the grocery store on cotton candy & skittles

12-17 Money spent on DVD's & CD's

18-24 Money spent on DVD's & Nintendo Games

25-30 Money spent on XBox360, Mail order Media (Netflix) & DLC (downloadable content for the kids on xbox)

30-35 Money spent on house upgrades, tile, floors, new roof

35-40 Replaced air conditioning, go to dinner more often

40-45 Buying my kids school stuff, clothing, giving them allowance to start the cycle over again.... only now there is different stuffs to buy....

DUH!

~J
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Blatant Coward, 15 Jun 2009 @ 3:37pm

Listening to less music?
Not me. But I am buying practically none either since I can't stand 99.9% of the main stream swill they call music. If it's on Clear Channel, it's gotta suck.
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Anonymous Coward, 15 Jun 2009 @ 3:38pm

Re: Why can't you admit that you don't know any more than the music industry?
And for those who claim to pirate because of some protest against the music industry and RIAA, why not do this: Don't use their product at all. Don't buy it, don't pirate it, don't listen to it. Then you'd be sending a message, and it'd be a better message than "I'm to cheap to pay for music so I'll just take it."

Sure, and that's exactly what I do. However when I read the Jammie Thomas case and saw it occurred in Duluth, MN, I saw it as a textbook definition of cherry picking. Have you been to Duluth? Of course they will rule in favor of the RIAA.

"The Wreck of The Edmond Fitzgerald" comes to mind. What about that cook?
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Anonymous Coward, 15 Jun 2009 @ 4:03pm

Re: Why can't you admit that you don't know any more than the music industry?
I don't think Mike believes that zero money is lost due to piracy (based on his past posts), just not the exaggerated amounts claims by the recording industry . The music industry seems to think that every pirated song = 1 lost sale which is far from reality. The vast majority of the music that is pirated would not have been purchased at $0.99 per song.

The losses in the recording industry is experiencing is due to multiple factors such as: music is legally available a la carte (no more paying for entire albums), other entertainment options (video games, dvds ,etc) more alternatives to owning music outright (such as satelite and internet radio), and yes piracy but they recording industry doesn't seem to seriously acknowledge any of these other factors.
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Big Al, 15 Jun 2009 @ 4:05pm

Re:
So, the price of gas went up - but wages didn't. That means that the $s available for entertainment dropped, so sales also dropped (cause and effect in action).
If you go back to the halcyon days of the eighties, there were no video game consoles (or at least very few) and no mobile phones and no DVD players. People still had a certain amount of discretionary spending available for entertainment, but the choices were fewer, so a lot of that money ended up in the music industry's pockets.
Now, fast-forward to the present day. Discretionary spending is shrinking due to the financial crunch, and the amount that is available is spread a lot thinner due to the choices available. Of course the music industry is going to 'suffer' because people will spend part of their money elsewhere. Even if no-one 'pirated' music, they would still find that their slice of the cake would be smaller due to competing entertainment forms.
It doesn't take an economist to work that out, does it?
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Anonymous Coward, 15 Jun 2009 @ 4:18pm

Re: Re: Why can't you admit that you don't know any more than the music industry?
Correct.
Lost revenue is attributed to a model created in the 1990s which hasn't been revisited.

Provide answers which Emenem posed in "Sing For The Moment."

Curtain Call doesn't mean a revenue call.
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Anonymous Coward, 15 Jun 2009 @ 6:28pm

Re: Re:
Agreed, but unlikely.
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Anonymous Coward, 15 Jun 2009 @ 6:31pm

The Real Culprit For The Decline In Music Sales
The product sucks
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Anonymous Coward, 15 Jun 2009 @ 6:50pm

Re: Re:
Not really.

Consider for a moment the widespread adoption of MP3 players. If the average user actually PAID for the content on their MP3 player, the music industry would be seeing the biggest increase in sales in history.

Instead, the music industry is in decline even as the average user gets a larger and larger music catalog.

So blaming video games (or gas prices) is as misleading as it comes. The demand for music is greater than it has ever been, but piracy means that sales are dropping.

Consumers don't have to choose between A or B, because they get their music for nothing.
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Anonymous Coward, 15 Jun 2009 @ 9:50pm

Re:
Hehe! The product managers I guess called early in the morning and the winner said they thought it was a joke and hung up.

It's nice to see product managers that highly involved in things... That they *may* have called that early in the morning to tell them they were the 1B download.

Speaks well to that company.
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FatGiant (profile), 16 Jun 2009 @ 12:35am

Games Hard to copy?
Really? Games hard to copy? Consoles hard to crack?

You can crack a console for the price of a CD.

Every game you want is available for download. Sometimes, even "BEFORE" they are available to buy. And yet, Gaming industry makes bigger profits each year.

Music industry on the other hand, can't deal with it's lost monopoly of entertainment. So, they choose to blame everyone they can.

As any 13 year old playing WOW would say: "Less QQ and more PewPew."

Oh, and before going to bed, try "http://www.jamendo.com" and be amazed how GOOD free music can be.
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Marcel de Jong (profile), 16 Jun 2009 @ 1:24am

Re: Re:
I have to think that terrestrial radio negatively effects music sales. Many people who use that service probably don't see the need to own the music when they have constant access to new music.

See what I did there? Do you also see what a silly proposition yours is?

As a lot of people have pointed out in the past, radio actually serves as a marketing platform for music.
Besides that, radio stations, whether they are online, via the air, or via satellite, pay fees to the record industry. So the music bizz is already getting money through that revenue.
But there are a lot of factors at play here:
1) while music quantity is going up, the quality that is being spewed out by these music-factories, is going down. Thus less incentive for people to buy new albums. Quality sells better than crap.
2) you can only spend your money once. And if you have to choose between a CD/DVD/game/food/rent/bills, you are going to look what you like best. (it's a financial crisis after all)
3) the music business has a lot of PR-problems, which they caused themselves, by suing customers, or would-be customers into bankruptcy. That's called biting the hands that feed you, though in their case, it's more like them biting the hand, then killing the person the hand belonged to, and the shooting the corpse to make sure.
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Marcel de Jong (profile), 16 Jun 2009 @ 1:36am

s/revenue/avenue/
of course I meant avenue instead of revenue. :)
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Sammie Houston (profile), 16 Jun 2009 @ 4:46am

Watunes, The New Music Industry!
WaTunes is a social media distribution service that enables artists, groups, and record labels to sell music, music videos, and audiobooks through leading online entertainment retailers, including iTunes,ShockHound, and eMusic. Artists and labels can sell unlimited music and earn 100% of their profits – ALL FOR FREE!
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Anonymous Coward, 16 Jun 2009 @ 4:48am

Re: Games Hard to copy?
cracking a console is out of the reach of the vast majority of consumers. Downloading music isn't. Jut because YOU can crack a console doesn't mean your neighbor can. It is ignorant as heck to assume that.

The vast majority of end users of consoles have paid games. The vast majority of MP3 player owners have a unit packed full of "borrowed" music. It isn't hard to see which one is making money. It doesn't make the infringing on music any more legal.
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Anonymous Coward, 16 Jun 2009 @ 6:06am

Re: Re:
the halycon days of the 80s - when i nd all my friends could not afford to bu ythe music we wanted so we taped everything. 100 c90s meant 200 albums for free. We were pirating then and music was at its peek, so no i dont beieve its to do with piracy that much.
and we made compilation tapes all the time that encourages music exploration like compilation cds do.
and i suspect tape quality was a bit better than mp3s at 128.
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Anonymous Coward, 16 Jun 2009 @ 11:44am

the halycon days of the 80s - when i nd all my friends could not afford to bu ythe music we wanted so we taped everything. 100 c90s meant 200 albums for free. We were pirating then and music was at its peek, so no i dont beieve its to do with piracy that much.

No matter which side of the piracy argument you fall on, you have to realize what an ignorant argument was just made here. Really, you don't see the difference between copying an album that somebody you know owns on a cassette, and millions of people having access to copy music because one person bough it. It's numbers. The issue is how many people can copy one single purchased copy of music.
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Anonymous Coward, 16 Jun 2009 @ 11:48am

Re: Re:
I have to think that price negatively affects music sales. Many people who have bills to pay probably don't see the need to own the music when they're losing their house.
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Anonymous Coward, 16 Jun 2009 @ 11:56am

Re: Re: Re:
From your line or argument it would follow that if people couldn't pirate music, they'd buy less games/gas/food. That seems false. Instead I would read it as piracy allows music to continue to thrive -- bands to continue to have their music heard -- at a time when economics would see the demand for such luxuries shrink. Piracy is saving music durring the economic crisis!
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Anonymous Coward, 16 Jun 2009 @ 1:46pm

From your line or argument it would follow that if people couldn't pirate music, they'd buy less games/gas/food. That seems false. Instead I would read it as piracy allows music to continue to thrive -- bands to continue to have their music heard -- at a time when economics would see the demand for such luxuries shrink. Piracy is saving music durring the economic crisis!

You're joking, right? Did you really lump games in with gas and food? There is no argument to be made that if people couldn't pirate music, some people would chose to spend some of their entertainment budget on music they used to be able to download for free. The only question is how many people and how much money, and is that money made up in other ways.
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snarko, 18 Jun 2009 @ 8:55am

the real questions are...
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snarko, 18 Jun 2009 @ 9:06am

The real questions are...
1. Is it possible to share so much music from a major label that the label itself is forced to declare bankruptcy and shut down?

2. How many of the labels that fund the RIAA would have to be shut down in order to make running the RIAA impossible due to a lack of income?

3. What has historically been done with the music catalogs of labels when they fail?

4. Do the any of the major labels store their "back catalogs" in digital format, and could a dedicated hacker get at them?

5. Does anybody want my fries?
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chris (profile), 24 Jun 2009 @ 2:40pm

Re: Re: gamers... pirates... it's all the same
So I buy my TV shows by season thru iTunes, mainly so I can use my DLO HomeDock HD (Real cool) and AppleTV on the bigscreen. Front Row runs on my computer too.

and i BT whole series at a time, toss them on a file server and watch them on xbox media center or on my netbook or nokia tablet. you kick it apple genius bar style, and i keep it pirate fabulous.

either way, that is how movies, music, and everything else will be consumed going forward. once all the babyboomers are dead, no one will buy physical media anymore. crushing napster and kazaa created bit torrent. crushing hulu and whatever comes after it will only create something indestructible.
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Earl Clifton, 22 Feb 2010 @ 4:27am

Game Stop, the new record shop
I've been thinking about this very subject the past few days and found your article. I would say that video game stoes like Game Stop are the new record shop. When it comes to money I would prefer to buy a used game anywhere from $5.00 - $20.00 before I would ever buy a CD. The game can interact with others online and provide hour upon hour of entertainment. CDs today are over priced and way too loud. I'll agree too that in the good times of music, that's all there was. Music and TV. Now we have the internet, and video games are more of an experience then ever. Some of them are like reading a book or playing a part in a movie or something. That's why people love them so much. I think Piracy would be a close second to video games but video games are most likely the biggest reason for kids and adults alike. Next time your near a Game Stop or game store have a look at it and tell me if it doesn't remind you of what record stores use to be like. Posters for all the new games and all, oh and bargain bins too
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