A major problem of the music industry that is not deeply discussed on many threads around here is how the music industry lost billions following the single mp3 sales system.

Lets make the following considerations to proceed:

1. Most commercial cds usually have 2 to 4 songs that the general public is really interested. The term "filler songs" and "One hit Wonder" were not randomly created. The demand for a commercial album is mainly sustained by few songs it has. To an easier understanding lets consider that each album has 3 songs that people are "really looking for". This is the actual market demand.

2. In US, the average cost of a CD was U$12-14 per unit in 2000, according to RIAA (*). To get even numbers, lets consider a reasonable price of U$12 per album.

3. With $12 per album, people were actually paying U$4 dollars for each songs they really wanted.

4. When the change to "digital" came, albuns were "dismembered" into single track downloading system. Although a positive aspect to the consumer, people started to get only the tracks they 'needed', the real market demand was attended. We can easily accept that $1.00 is an average cost per downloaded track for our base calculations.

5. This way, instead of spending U$12 dollars to have the demand attended, people started to spend only U$4 to get the same thing.

A huge drop.

But this analysis is very simplistic, so let's go into numbers:

6. US cd sales record is from 2000 when 785 million units were sold (*). Assuming the consumer behavior cited above, people really wanted just 3 songs on average per given album. So it was an actual demand for 2.35 billion tracks.

7. I could not find numbers for paid downloads in 2000 but official counts from 2003 attested U$19.2 million digital revenues (*). Based ondigital sales growth we can drop out reasonable 20%, getting a good estimate of near 15 million dollars by 2000 from that source. At $1 per track as average, we have 15 million tracks, the attended demand that year. If we translate this demand to "regular commercial CDs" we have that 15 million tracks form 5 million albums.

8. US cd-singles sales that year (2000) were near 33 million (*). As they are singles, these count as 33 million tracks, or the equivalent of 11 million "regular commercial CDs".

9. Summing them up we have 785 + 5 + 11 = 801 million physical units legally sold in the "Golden Year 2000". 801 million "commercial CD" sales consists in 2.40 billion "demanded tracks", a total attended demand.


10. In 2009, US digital market sold around 1.2 billion single tracks (*). Doing the reverse, if they were inside a "commercial CD" in 2000, these would turn into 400 million cds sold to attend the 1.2 billion tracks in demand.

11. In 2009, US digital full albums sold 66 million units (*). A demand for 198 million tracks.

12. In this same year (2009), US regular "commercial cds" sales were 379 million units (*).

13. Summing the three 2009 figures to get the "Total Attended Demand" of that year, we would have 400 + 66 + 379 = 845 million "commercial cds". Or a "single track demand" of 2.55 billion tracks.

801 million albums was the actual "well-attended demand" of the Golden Year 2000.

845 million in the of 2009 is a growth of near 5% on the attended demand. In 2009, the number of people "paying for what they wanted" is 5% bigger than in 2000.
We could say that there is a similar amount of people paying for music today that it had during the 2000, the best year for the music industry. The attended demand remained constant in 10 years.

If the attended demand is almost the same, why is the Music Industry loosing lots of money then?!

Let's translate the above into numbers.

2000 sales:

CDs: 785 million units785 million is a demand of 2.35 billion tracks.
785 million CDs at U$12 = U$9.42 billion dollars.
Singles: 34 million units
34 million is a demand of 34 million tracks.
34 million singles sold at U$4 = 136 million dollars.
Digital Downloads: 15 million units
15 million is a demand of 15 million tracks.
15 million sold at U$1.00 = U$ 15 million dollars
TOTAL (in billions): U$9.42 + U$0.136 + U$0.015 = U$9.571 billion dollars

So, in 2000 to attend an actual demand of near 2.4 billion tracks the US Music Industry earned U$9.571 billion dollars selling CDs. The average of U$4.06 per track.

2009 sales:

CDs: 379 million units
379 million is a demand of 1.13 billion tracks.
379 million sold at U$12= U$4.54 billion dollars
CD Singles: 0
Physical Singles are statistically extinct.

Singles Downloads: 1.2 billion units
1.2 billion is the actual demand for it. If they were inside regular albums, these would be in 400 million CD units.
1.2 billion sold at U$1.00 = U$1.2 billion dollars.
400 million albums at U$12 = 4.8 billion dollars
Here alone the Music Industry lost 3.6 billion dollars.
Album Downloads: 66 million units.
66 million albums is a demand of 198 million tracks.

TOTAL: 4.54 + 1.2 + 0.198 = 5.93 billion dollars.

So, in 2009 to attend an actual demand of 2.53 billion tracks the US Music Industry earned U$5.93 billion dollars. An average of U$2.3 dollars per track.


So, with a fairly similar demand the Music Industry obtained U$9.571 billion in 2000 and ten years later is obtaining U$5.93 billion. This alone is a reduction of 38,1% of the revenues just by changing the format of sales.