Numerous articles appear weekly regarding the decline of the music business. The media utilizes Nielsen SoundScan's information and Billboard's charts as the primary barometers of our industry's healt
Jordan Katz is co-president of Sony BMG Music Entertainment Sales Enterprise.
Numerous articles appear weekly regarding the decline of the music business. The media utilizes Nielsen SoundScan's information and Billboard's charts as the primary barometers of our industry's health. Artists and management also look to these sources to get a sense of how their industry is performing.
Unfortunately, the industry's success is measured in terms of only one portion of the places where our content generates revenue. While the majority of our sales continue to come through traditional channels, the various digital channels are growing exponentially.
Two ideas are being tossed around to deal with this discrepancy. One involves the use of "album equivalents" for digital sales. An album equivalent would be determined by dividing the total number of digital tracks sold by a predetermined number that would represent the equivalent of one album.
There are many points of view about what that number should be and what methodology should be used to arrive at that number. Most methodologies yield a factor of nine or 10, although the Recording Industry Assn. of America recently used 12. For now, let's just accept the premise that there needs to be a formula for measuring these digital sales and adding the album equivalents to the physical album totals.
Similarly, master ringtones should have a distinct formula that converts such sales -- which are a segment of a track -- to a number that can be added to the overall market. When all is said and done, downloads and ringtone sales are music purchased by consumers and should show up in our industry tallies.
There are at least three places this digital data should be included. First, the charts that measure total industry sales. Second, the market-share reports breaking out sales by music company and label group.
A third suggestion is to create a "Music Chart" or "Song Chart" that would include sales through any media along with physical sales (with some formulaic representation for master ringtones). This would fill the vacuum created by the dilution -- for whatever reason you subscribe to -- of physical singles sales.
A presentation by Nielsen SoundScan at the National Assn. of Recording Merchandisers convention in August touched on this concept. And just last week, Billboard added "track-equivalent album" sales to its Market Watch chart. Using an album-equivalent factor of 10 for downloads, this week's Market Watch showed a 3.8% decline in album sales from the prior year, rather than a 7.2% decline (based on the chart year beginning with the week ending Jan. 11). Similarly, the RIAA, using a factor of 12, recently reported the year-over-year decline to be only 2.4%.
Whichever factor you use, the industry is actually much healthier than the current chart system would have you believe. On top of that, these examples do not incorporate sales of master ringtones, an increasing revenue stream.
A second concept being discussed is the use of a wholesale-based chart. Other entertainment industries are measured in terms of the dollars generated rather than units sold. The two best examples are box office for the film industry and concert gross for the touring industry. A wholesale-based chart would be an equalizer, where actual dollars are used to measure success regardless of format.
Ultimately, the industry can be more accurately represented when you factor in all of the votes consumers make with their wallets rather than just a slice (albeit a large one). I applaud the fact that Market Watch now includes TEA sales data, but this needs to appear as more than a line in a weekly Billboard sales report or a Power Point page at the NARM convention. We need to make it "official." Once these figures get reported by Nielsen SoundScan and published in Billboard, the rest of the media will disseminate a more accurate read on our business.
The disparity between physical sales and the sum of all music purchases will only widen in the coming years. We need to incorporate new formats that are producing measurable sales into the charts. As new formats and modes of delivery arrive, we need to figure out how those purchases are counted and added in as well.
It is obvious that we need to make some adjustments so we can get a more accurate view of music sales for ourselves and for those on the outside looking in.