Today I give to you a couple of visual snapshots of the recorded music industry, along with a lesson on the importance of adjusting for inflation &/or population growth.
Here are the raw numbers that caused something of a hubbub. Ask yourself — where is the industry at its peak?
So, there are several technology transitions going on here, culminating in a sorry state of affairs for the supply side of the music industry. One implication is that the introduction of cassette tapes had no real discernible impact on industry revenues, even though people rampantly started taping one anothers vinyl at that point. (I actually have several boxes of tapes that I recorded from record rentals from That’s Rentertainment.) Interesting that the Record Labels only began shaking them down when the compact disk market took off). A second implication is that CDs marked the real heyday for the record labels.
With that in mind, let’s look at these same numbers adjusted for inflation and put in per capita terms:
Completely different picture, isn’t it?
This seems to suggest that (non-prerecorded) cassettes cannibalized vinyl revenues, and it was only the introduction of the superior CD format that resuscitated the industry.
In IO, we are talking about the big challenge of the “New Economy” is often not in creating value, but in capturing it. Do you think the total value of recorded music is 35% of what it was 15 years ago? Or, is it more likely that consumer surplus has gone through the roof? I don’t have any way of answering that question, but I have my doubts about the former proposition.