TEXT OF INTERVIEW
BOB MOON: Maybe you saw this front-page story in the Wall Street Journal last week. The headline says, "Sales of music plunge sharply."
Not much of a surprise, but still alarming news for the recording business. The paper reports the music industry has posted some of its weakest sales numbers ever in recent weeks. Sales of compact discs down 20 percent from a year ago.
There's been plenty of finger-pointing. But what if the reason isn't really all that complicated?
Reporter Aaron Pressman has a very simple theory that we noticed on his blog over at BusinessWeek magazine's website. Aaron, welcome to the program.
AARON PRESSMAN: Hi, glad to be here.
MOON: So, are you spending the holiday listening to your favorite tunes?
PRESSMAN: Well actually, at our house, we've mostly been watching DVDs.
MOON: I guess that's the point that you were making in your blog here that CD sales have been declining for a few years now. But it's not piracy, and it's not the cost of CDs. It's not poor marketing. What do you think it is?
PRESSMAN: I'm sure all those things had a little bit to do with it. But what's funny to me is that nobody ever steps back to look at the whole picture and say, you know, what are regular people doing with their time? So I started to look into some research about what people are doing with their leisure time.
MOON: And what are we doing?
PRESSMAN: Well, we're watching a lot more television than we used to, and we pay more for it for all kinds of cable and premium channels. You know, HBO is at all-time record subscribership and so forth. We pay more to listen to music on satellite radio, there's ah, 10, 20 million people now who pay to listen to radio. And we watch a lot more video at home — people are buying big televisions, they're buying over a billion DVDs a year now. So there are a lot of other things competing for our attention and our entertainment dollars.
MOON: So what got you thinking about this now?
PRESSMAN: Well, you know, people have been writing about the decline in CD sales for a long time, and this year it appears to really have accelerated. And this sort of pattern, where a slow decline accelerates into a rapid decline, is very typical of what happens. You know, the forces start to feed on themselves. Tower Records goes out of business, there are fewer record stores. There's less interest in finding new artists, because there's less of a market to put them into. It's the exact same kind of thing you see, you know for example, at Kodak with film — old analog, old-fashioned film. You know, it went down slowly for a few years and then finally, it just kind of has just crashed. Because all the forces . . . you know, there's fewer places to buy film and develop it and all that.
MOON: DVDs have been around for awhile now. Are we seeing a similar trend there?
PRESSMAN: Well, you know, DVD sales are still rising, although by less and less amounts each year. And this past year, 2006, was the first year ever when the number of new titles released on DVD was not higher than the previous year. So it's the same sort of thing that we saw with music, where the studios have put out their back catalogs — James Bond movies came out for the third time on DVD this year. And eventually, that has to end. You know, we'll all have all the old movies, and it'll just be the new releases. So you could see the same effect.
MOON: Is there a chance that they can learn from the music industry's experience here?
PRESSMAN: Well I think in some ways, they did learn from the music industry's experience in that DVDs have always been priced very competitively and CDs were not always priced competitively. In fact, there was even an anti-trust action by the Federal Trade Commission in the 90s. So to some degree, I think they did learn about that. But what we're talking about is sort of the inevitable change in tastes of the consumer. And, you know, I guess what they can learn from that is to kind of pay very close attention to what people want and what people are looking for and try to be the next big thing.
MOON: BusinessWeek reporter Aaron Pressman. Thanks for taking time out of your holiday to speak to us.
PRESSMAN: My pleasure.