More Ado About the Online Independent Music Industry

A few weeks back I looked at market share figures in the music industry. I’ve since thrown at the wall a few more numbers from IFPI publications during the period of interest (2002-present) to help substantiate my (perhaps presumptuous) claims about whether independent music is actually doing any better than it used to. As some have pointed out to me (and while it’s an obvious criticism, it’s also a crucial one – one I’ve had no time to delve into until now. ahem. look at the Clicknoise! covering his meandering tracks!), market share doesn’t reflect real numbers, and an upsurge in the indpendent share could have more to do with flagging revenues among the Majors than with any real increase in business for independents. However, as I explain today, this doesn’t appear to hold any water. Indies are experiencing increased revenue.

A few things up front. Our statistical picture is notably incomplete. 2005 is the first year for which online revenues are specifically distinguished from other formats (prior to this year, they were still lumped in with total industry revenues). It is also the first year the IFPI did not publically report the breakdown of relative shares of music industry revenue as distributed among the Majors and Independents (as I’ve noted previously, we still have Nielsen’s figures for 2005, but their methodology produces wildly different, and likely unreliable figures for indies).

But we can make some rough calculations anyway, using the known real value of the music industry as against market share between 2001 and 2004.

Total Music Industry revenues, global, USD (IFPI)

2005: $33 billion*
2004: $33.6 billion
2003: $32 billion
2002: $32 billion
2001: $33.7 billion

So revenues fell between 2001 and 2002, then steadied in 2003. Revenues increased from 2003 to 2004, and then declined slightly again in 2005.

If we compare these figures to the rate of increase in market share for Independents (in years for which reliable data are available), pasted in from my previous article…

Indie Music market share, global (IFPI)

2004: 28.4%**
2003: 27.1%
2002: 25.3%

…then the Independent sector of the global music market was valued as follows in those years (rounded to the nearest hundred million):

2004: $9.5 billion
2003: $8.7 billion
2002: $8.1 billion

The increase of Independents’ share of the market is not explained by the decline of the major labels’ revenues. Still, we’ve yet to see the full impact of the crumbling of traditional indie distribution and retail chains (indie record shops, etc) which are now feeling the pinch of competition from digital download services, which are making more and more independent music available for paid download.

I’m going to consider this an ongoing investigation, as there are too many undefined concepts in the mix (what is an “independent”, how do pre- and post-digital revenue measurement methodologies compare, and what are their respective gaps in reporting vis-à-vis those independents, whether it’s sales on smaller music sites, or in smaller indie bricks-and-mortar shops). I haven’t even begun to introduce the systemic underreporting of indie revenues as attached to touring bands that use the technological wonder known as the merch table. And I haven’t blathered on nearly enough about the strategic gaming of published figures (not to mention outright lying about them) in the bullshit machine known as the music business (and yes, this affects indies as much as it does the majors, frustrating the work of researchers at every turn). More on this later.

Anyway, off to the studio to actually make some music…

{*Note – this is a simple figure that misrepresents the complexity of the current market. Physical formats fell by 6.7% (in revenue) or 8% (in units shipped) over 2004. Digital revenues of course bucked this trend, going from $400 million in 2004 to 1.1 billion in 2005, helping to offset the overall downward trend (but not by much, as digital revenue is still dwarfed by CD sales (approximately $17 billion in 2005). Also of interest is that digital sales are divided 50/50 between “online and mobile” (we ought to dispense with this distinction as soon as we can. ungh.). But full song downloads picked up, outpacing the rate of increase in ringtone downloads. Also note that the reported changes over the years (the dramatic “7% decline in world market revenues in the music industry” sound bites that were often cited during the past few years) aren’t really reflected in these IFPI numbers – they must be cooked up somehow…but I’m not going to waste any time right now trying to understand how that propaganda machine works. Maybe later…}

{**again – figures on the independent industry for 2005 and 2006 have not been released by IFPI. I’m wondering if, as with measuring civilian casualties in Iraq, maybe they weren’t even measured at all by the people embroiled in sustaining these klunky enterprises (illegal invasion/occupation or out-of-touch music business models). We need a Music Industry Body Count, or even better, a Lancet study. }

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