Nov 09
2
Music Industry Losses/Profits – Maxims.
An anecdotal statistical examination of music industry
potential income with no file sharing.
The music industry have managed to convince global
Governments that they should have special protectionist legislation enacted.
No-one has bothered to have a look at the logic behind their
claims.
Forget file sharing for a moment.
The question should be, how much discretionary income do the
music Industry feel that they should receive and how much do they receive and
what portion is that revenue when measured against all other products necessary for living
life.
The other day I calculated the average schlepping citizens
(being me) music appreciation library as constituting 1400 tracks collected over
36 years of buying 45’s, LP’s, cassette tapes, 8-tracks and CD’s.
This brought up an interesting question. If I represented
the average citizen, what then did this mean for the music industry?
Bear with me for a few moments. Read the boring stuff and
assume (just for now) it is correct.
There are six billion people on planet earth.
The average age is thirty-four years old.
Historically the average person purchases 3.027 CD’s per
annum.
The average CD holds 12 tracks of music.
The retail value of a music track is $0.99.
If we assume that all planet earth want to listen to all the
same type of music – i.e. Hip Hop, heavy metal, classical, country and western,
with no differentiation, or preferences, then we can say that the maxim potential
for music sales in the world today is:
Population (6 Bn) by average CD’s times 12 tracks @ $0.99
which equals $ 18,162,162,162 P.A.
If we adjust that by
language bias. i.e.: Not everyone would appreciate an English lass singing “Fuck
You very much” and may well prefer the
gentle crooning voice of a sitar accompanied local language ballad.
In fact it may be a
surprise to the music industry, but 67% of the world don’t speak English as
their first language.
So if we knock out
the 67% to whom most english music is of questionable value, how are we doing.
Then the total
revenue per annum to the industry would be in the order of $
5,993,513,513 or approximately $1.00 per Global citizen per year.
Unfortunately as we explained in how the
content industry won the West, not every citizen has a dollar a year to
spend on music. e,g,: Burundi,
the poorest nation on earth where the residents have only $120 per annum to
live on.
Therefore, we must consider music a discretionary expense
that comes after the basics of food, shelter and clothing and of course
considerably behind the purchase of a music player device, (like a CD-player
for $50.00); oh did I also say that playing music normally requires
electricity?
The poverty level of Americans in 2005 was calculated (by
the ACS) as being $7765 per adult.
In the table at the end of the above mentioned
article, there is an entry for the global aggregate income per annum.
Entry number 133 is for the World and reads World $8,230.
The sources for that table originated from various datasets
supplied by the IMF, World Bank, CIA Factbook and the OECD.
In other words, 6,000,000 are aggregated to having a
discretionary income of only $465 per annum.
If you had $465 to buy all or your non food, shelter or
clothing items per year, how much music would you buy?
Yes, that includes petrol for the car that you can’t afford
to buy.
Yes that includes presents for your kids
Yes that includes dinner at Level 41 for 2 which comes to
gee, about $465 (including two good bottles of wine).
In other words, the entire worlds discretionary income is
only $2,790,000,000,000 which is spent
on the produce of all industries.
So before we pass any legislation forcing people to spend
their $465 on music that is culturally irrelevant let’s just see how the
numbers work out for Australia.
One of the lucky countries in the world Australia at position 175 in the list
with an income of $42,020 or 5.4 timers higher than the American definition of
poverty.
Our population is 22 million. Therefore retail music
sales in Australia
should account for 22 million and some change.
In 2008, Aussies spent
(wholesale value only) $177,901,624 in the period January to June.
In other words, in the first six months, they exceeded the
statistical expectation of the music industry by 3.99 times or 7.97 times for
the entire year.
Remember above I said that Australians had 5.4 times more
discretionary income than the definition for poverty?
It would seem that we are doing 2.57 times better that the
world average. In other words, Australia
as a country spends way too much of it’s discretionary income on music.
Add the retail markup of 35% (total now $240,167,192) and we creamed the music
industries expectations.
This now represents 0.015%
of Australia’s imports.
To put that into perspective, our food only imports account for 10.9% of our overseas import trade.
We have already determined that the average Australian is in fact spending $ 10.91 per annum on music. That's eleven music tracks per year.
WOW!
But Koltai, there are two things wrong with your
assumptions.
1.
All Australians speak English.
2.
The Aria numbers include wholesale revenue from
other sources, like licensing music in games and Ringtones.
Good points.
In relation to point 1:
Australia
is no longer the WASP country it was in the fifties. We are now a
multi-cultural integrated cosmopolitan society with multiple heritage streams
in some cases overtaking and dominating the earlier prevailing English ones.
e.g.: Fish and Chips shops compared to Kebab stands.
Therefore the language spoken at home in this multi-cultural
society is an important consideration.
i.e.: Is an Australian Hindi mum going to be enamoured of
her 12 year old daughter playing Metalica at full volume throughout the house?
Possibly not.
According to the ABS, four million Australians were born
overseas. These four million have had ten million children born in Australia.
Whilst it is obvious that the children born in Australia
are likely to speak English with their peers, at home, 64% of Australians
still speak a foreign language and this also impacts to an extent on their
viewing and listening habits and consequently their music language purchases.
We could use a further analysis of my music collection to
assist us in this determination.
I was born in New Zealand of Hungarian refugee parents. I
have spent the majority of my adult life in Australia
with a few years in Hungary
and approximately eighteen months in countries like America,
Nauru, Iran,
Hong Kong, Germany and the
UK.
Of my music collection, (114 CD’s/albums/cassettes) 17 CD’s/tapes are Hungarian, 3 are German, 2 are French, 2 are Romanian
and 2 are European language compilations.
Here we depart momentarily from the norm. I may not
represent the epitome of average consumer having been able in my lifetime to
travel to multiple countries.
However, I do speak languages other than English and
consequently my music interests roughly approximate the social interaction I
have with the world in those languages or 22.8% of my total music library.
Now the question that one has to ask, is how many of those
foreign language CD’s/cassettes did I purchase in Australia?
The answer?
Not one.
In regards to point 2.
$4,028,088 is for Digital Ringtones
$2,673,480 is for digital other.
Therefore deduct 6.7 million if we’re being picky.
However, as Digital Ringtones and
digital other are a development of the same technology that evolved P2P, I have
left the numbers in.
In other words, it is incorrect to selectively discriminate
statistics.
Ringtones are sales of music copyright, as are digital
other; they would not exist without the same tools that the industry now blame
for their declining revenues.
So, in summary, I have to ask, why are our politicians
listening to music industry claims about file sharing damaging their business?
Why is Australia
about to sign up for ACTA?
The numbers quite clearly state categorically, that the
industry is doing far better than could be economically expected.
References:
MAIN LANGUAGE OTHER THAN ENGLISH SPOKEN AT HOME /
PROFICIENCY IN SPOKEN ENGLISH
http://www.abs.gov.au/AUSSTATS/abs@.nsf/0/5C5E4429075FC19FCA25737F001682F6?opendocument
General Social Survey, 2002
Income, Earnings, and Poverty Data From the 2005 American
Community Survey
http://www.usinfo.org/enus/economy/workforce/docs/acs-02.pdf
TABLE 13a. MERCHANDISE IMPORTS, Standard International
Trade Classification (1 and 2 digit), Customs Value