volume 2
april 1999

Trends and shifts in U.S. music sales (1997-1998)

An overview of the annual demographic survey's of the RIAA

by Ger Tillekens

Each year the RIAA — that's short for Recording Industry Association of America, an institution which represents U.S. record labels — tries to compile, analyze and report on data concerning the volume of shipments and the value of all formats of recorded music shipped into all market channels. The association also researches trends in music by constructing consumer profiles. Recently the RIAA brought its sales statistics and consumer report for 1998 into the open on internet. The size of the U.S. sound recording industry in 1998 came out as an impressive 13.7 billion dollars, realized mainly by the sales of full-lenght CD's. There are more facts and figures likes these to find on the web site of the association. In this summary we take a short look at the most important findings of the RIAA for 1997 and 1998.

Left: In 1997 and 1998 the Spice Girls were selling high to a young female public in the 10-14 year old segment

Global sales. March, 23rd, 1999 the RIAA, released its annual demographic survey of 3,051 music purchasers in the United States of 1998. "Several interesting profiles emerged in 1998, including the boom in R&B and Gospel, as well as the sharp decline in Rock sales," declared RIAA president Hilary Rosen in her press statement. "Demographic shifts also continued with women outbuying men for the second year, and a drop in purchases among 15 to 29 year-olds, contrasted by significant growth among those age 35 and older." Trends and shifts like these are important as the record industry on the global scale is a market reckoned in billions of dollars. So it's understandable the music industry keeps a close watch on its markets. But, as other "music watchers" may be interested too, we here summarize the main findings. We start with the sales statistics. Most of the facts and figures are derived from just one table, which you can find on a separate page: RIAA's Yearend Statistics.

According to the International Federation of the Phonographic Industry (IFPI), global sales of pre-recorded music in 1997 were valued at 38.1 billion dollars. That year the total unit sales amounted to 4.2 billion. For the different formats that number totals to 2.2 billion CD's, 1.4 billion cassettes, 200 million vinyl LPs and 500 million singles. As calculated by the RIAA this represents a year growth of 2% in both volume and weighted value compared to 1996. North America represented 33.8% (12.9 billion dollars) of all music sales in 1997, with Europe coming in a close second at 33.3% (12,7 billion dollars). Japan followed with 16.5% (6,3 billion dollars), then Latin America (6.8%; 2,6 billion dollars) and Asia (5.5%; 2,1 billion dollars). Other markets included Australia and its surrounding region (2.2%), the Middle East/Turkey (1.2%) and Africa (0.6%). About 40% of growth in music sales was generated from emerging markets, especially Latin American countries. In both foreign and domestic markets, the RIAA notes, Latin music has demonstrated an extraordinary potential for even greater gains in the coming years.

Full-length albums in 1997 and 1998. Though all those billions of dollars sound good for the industry, the situation is not as good as it may seem at first sight. In the nineties and especially over the last years economic growth has been considerable in the U.S. economy. As this translates into high discretionary incomes among consumers, and as one of the most popular entertainment pastimes still is listening to music, one would expect a positive effect on music product sales. In fact in the United States, nearly nine out of 10 adults accompany their leisure activities with music. However, though overall entertainment spending was steadily increasing, for the CD market in the United States 1997 didn't seem a very good year as the local sales trends took a downward turn.

Figure 1: Sales of full-length vinyl LPs (blue), cassettes (green) and CD's (red) in units 1989-1998

As the RIAA statistics show, in 1997 the total number of full-length CD's shipped in the United States decreased by 3.3% compared to 1996, dropping from 778.9 to 753.1 million units, with a value at suggested list price of 9.9 billion dollars. Looking backward, however, the relative downfall in 1997 only seemed to be a temporary dip, as in 1998 things took a turn for the better. As the RIAA says, figures released at midyear 1998 already demonstrated a steady improvement in the recording industry. The net number of all audio and video units that manufacturers shipped to U.S. markets grew from 470.7 million units at midyear 1997 to 502.5 million units for the same period in 1998. Computed at suggested list price, the total 1998 midyear shipments represented a dollar value of 5.8 billion dollars — up 11.9% from 5.2 billion dollars at midyear 1997.

All in all at 1998 yearend, manufacturers saw a 5.7% net unit increase in audio and video product shipped to domestic markets (from 1.06 billion units in 1997 to 1.12 billion units in 1998) and the corresponding dollar value of those shipments (at suggested list price) reached 13.7 billion dollars. The upward turn was clearly reflected in shipments of the industry's core configuration, the full-length CD. Net unit shipments of CD's experienced a midyear 1998 jump as 370.6 million units were shipped to retail, compared with 331 million at the midpoint a year earlier. The shipment hike meant a midyear 1998 dollar value of 4.9 billion — going up from 1997's midyear figure of 4.2 billion, and representing an all-time midyear high, while direct and special markets, which include mail order operations and record clubs (18% of all shipments), were rebounding with 6% growth. At yearend 1998 CD unit shipments had grown from 753.1 million in 1997 to 847 million in 1998 and CD dollar value rose from 9.9 billion dollars in 1997 to 11.4 billion dollars in 1998.

The trend in format change continued in 1998. During 1991 the compact disc eclipsed cassettes as America's favorite format, and since then the CD market has continued to grow (see figure 1). In 1997, the CD market share increased 2% to 70.2% of the market and in 1998 with a rise of 4,6%, accounting for 74.8% of the total market, full-length CD's were consumed at a greater rate than in the past four years. Although in 1997 full-length cassettes did hold a modest market share of 18.2%, the configuration showed its slowest rate of decline since 1990, with a less than 1% decrease in 1997, suggesting the cassette's position had stabilized. The format saw a 1998 midyear decline of 8.4% from 1997 midpoint numbers. The midyear 1998 dollar value for album cassettes was 616 million dollars. At the end of 1998, full-length cassettes, while maintaining their second place position, had continued their gradual decade-long decline to 14.8%. Cassette unit shipments dropped from 172.6 million in 1997 to 158.5 million in 1998. Cassette dollar value fell from 1.5 billion dollars in 1997 to 1.4 billion dollars in 1998. The format, however, is not yet dead. With full-length cassettes constituting 16% of all album unit shipments, cassettes still will remain, RIAA declares, an important part of the overall market, and manufacturers will continue to produce and distribute every genre in this format, as cassettes represent more than 1 billion dollars in sales.

Right: A 1998' bestseller was the soundtrack of the blockbuster movie Titanic and its title song, sung by Celine Dion

Singles and music videos. Nearly all product configuration shipments went down in 1997. The exceptions were CD singles and music videos. Shipments of CD singles increased significantly, from 43.2 million units in 1996, to 66.7 million units in 1997 for a dollar value of 272.7 million dollars at list price. This one-year increase supports the doubling in CD singles shipments since 1995. Midyear 1998 this trend seemed to continue as CD single shipments had increased about 10% over 1997 midpoint figures. However, though music buyers embraced the CD single in 1997, increasing its market from 4.2% in 1996 to 5.4% a year later, the format declined more than 2% in 1998. In 1998, singles shipments dropped across the board. CD single unit shipments dropped from 66.7 million in 1997 to 56 million in 1998. CD single dollar value dropped from 272.7 million dollars in 1997 to 213.2 million dollars in 1998. There also were considerable slips in the same period for cassette and vinyl singles respectively (see figure 2).

Figure 2: Sales of single format vinyl (blue), cassettes (green) and CD's (red) in units 1989-1998

Music videos cover just a small part of total product sales. In 1997, music videos accounted for 0.6% of music product sales, down from 1.0% a year earlier. The product configuration reached its peak in 1993, when it grabbed 1.3% of the market. Though, while the market share of music videos decreased, the number of units shipped actually increased 10.1% from 16.9 to 18.6 million units. This represented a dollar value at list price of 323.9 million dollars. Still in 1997, music video purchases were at their lowest point since being included in research studies in 1991, when the product comprised 0.4% of the market. In 1998 music videos recovered their 1996 market share of 1% and vinyl maintained at 0.7%. Seen over the past several years, the demand for music videos has grown slowly but steadily, even in years when all other formats remained fairly flat. 1998 even proved to be a great year for music videos, evidenced by a 45.9% increase in unit shipments (from 18.6 million in 1997 to 27.2 million) and a 56.8% increase in dollar value (508 million dollars). Music video dollar value increased 56.8% from 323.9 million dollars in 1997 to 508 million dollars in 1998. Music videos certifying Gold or Platinum in 1998 reached levels far beyond anything seen before in the RIAA's statistics.

In 1998, for the first time the RIAA reported sales of DVD music videos. These numbers do not reflect total DVD shipment activity because not all reporting companies are able to provide DVD statistics at this time. Unit shipments of DVD music videos in 1998 totaled 485,000. The dollar value of those DVD unit shipments in 1998 was 12.2 million dollars.

Right: In 1997 and 1998 Country held about 14% of the consumer market. Photo at the left: nineties' country star Jewel

Outlets. Where all those products new and were did the consumers buy all of them? To answer these questions RIAA quotes data from the National Association of Recording Merchandisers (NARM), showing the purchase of catalog product declined from 44.4% in 1996 to 40.1% in 1997. Conversely, the sale of current product (defined as sales from product within 15 months of its release date) rose to 59.9% in 1997 from 55.6% the previous year.

Where buyers made their music product purchases in 1997 was also telling. In 1996 and 1997, the RIAA concludes, a number of retailers experienced downsizings and restructuring. This contributed to a decline of 6.5% in total units sold at retail outlets and a 2.4% drop in dollar value at list price. However, retail also showed renewed strength. According to the NARM, there was a continued drop in the average percentage of returns from retail stores, down to 16.4% in 1997 from 20.8% in 1995. Also, store closings have largely been completed, and restructuring has led to an overall improvement in retail inventory and operations and retail stores continued to hold the lion's share of the market for recorded music. Purchases from the overall retail sector even grew from 81.4% in 1996 to 83.7% in 1997. In fact, record stores experienced their first market share increase in eight years, expanding nearly 2% from 49.9% in 1996 to 51.8% a year later. Record stores had 51.8%, while other retail outlets (such as department stores, discount chains, electronic stores and even grocers) held a 31.9% share. In 1998 even more music consumers (86%) shopped at retail outlets than in the past eight years. However, the gap continued to narrow between purchases made at traditional record stores versus other retail stores such as consumer electronics stores and specialty stores (51% versus 34%.).

In 1997 consumers also significantly slowed their participation in record clubs. Record club purchases tailed off from a 1994 high of 15.1% to 14.3% in 1996 and 11.6% in 1997. One year later, in 1998, the percentage of consumers who purchased from tape and record clubs (9%) even dropped to the lowest level since 1990. In 1997 mail order experienced a decline too, falling to a seven-year market share low of 2.7%. In other special markets, TV offers for music product owned a 0.9% share in 1997. However, after a disappointing 1997, midyear 1998 data showed a slight increase in shipments to non-retail outlets. For the end of 1998 the RIAA's yearend report even showed an increase of about 10% in unit shipments to direct and special markets, helping fuel the total growth in unit shipments.

Perhaps the most watched sector of non-traditional outlets at the moment is the internet. The RIAA began tracking shipments to sources selling via the internet in 1997. Shipments over the internet that year accounted for a modest 0.3%. Sales from internet sites weree expected to jump significantly in 1998, with sites such as CDNow and Amazon.com marketing on television and in print to mainstream consumers. In addition, retail chains such as Tower Records & Tapes, and smaller independently owned retailers, had begun embracing the web. In 1998 the RIAA broke out online sales for the second year, indicating 1.1% of music buyers made purchases via the internet. While instances of online purchasing were still relatively low, this number has tripled from last year (0.3% to 1.1%) and now equals the number of acquisitions made from television offers (not broken out on chart).

Left: Remarkable for 1997 was Elton John's new version of "Candle In The Wind", made as a tribute to Princess Diana

Genres in 1997. Sales figures may be interesting, but perhaps more so are the differentiations in the genres. RIAA research shows, that the top music genre by far in the United States was and, though declining, still is Rock. In 1997, this genre represented 32.5% of all music product sold. Country music followed with a market share of 14.4%, then R&B (11.2%), Rap (10.1%), Pop (9.4%) and Gospel (4.5%), which was up 1.4% from the last two years to a 4.5% market share in 1997. Classical and Jazz each enjoyed a market share of 2.8%. Although Rock did remain the dominant music genre, it steadily lost ground over the last 10 years, from 42.6% to 32.5%, about one-third its market share. Both Classical and Jazz also experienced declines over the years, dropping from 1988 levels of 3.5% for Classical and 4.7% for Jazz to 1997 levels of 2.8% for both genres.

By contrast, several genres demonstrated significant increases over the last decade. Country, which held a 7.4% market share in 1988, nearly doubled its consumer hold, while Rap has more than doubled its 1988 share of 4.2%. Rap made especially solid gains over the last three years, bouncing back from an eight-year market share low of 6.7% in 1995 to its all-time high of 10.1% in 1997, thereby eclipsing Pop as the fourth best-selling genre in America. Despite a slight decrease in market share in 1997, R&B remained mostly healthy, increasing from 1988's 9.1% to 11.2% in 1997. Gospel also experienced strong growth, swelling from 2.5% in 1988 to 4.5% in 1997. In addition, consumers embraced ethnic music forms, a fact that was supported by the amazing increase in the Latin music market. Although soundtrack recordings comprise a relatively small portion of the overall music market, shipments have steadily increased from their 1988 level of 0.5% to 1.2% in 1997.

Rap even came out as the fastest growing genre by far. Ironically, RIAA does not forget to mention, this music form was initially regarded by many as a passing fad. As the figures show, rap music significantly increased its market share in the past year, jumping from 8.9% in 1996 to 10.1% in 1997. Four of the eight best-selling albums were recorded by Rap acts and music by Rap artists also contributed to the increased success of soundtrack recordings. In 1997, soundtracks had a market share of 1.2%, up from 0.8% the previous year. As expected, mainly younger consumers are driving the sales of Rap music.

Latin music, in the RIAA definition, is a broad label and comprises numerous genres, ranging from Cuban Jazz and Salsa to Rock and Espanol. According to midyear figures, 22.9 million units of Hispanic music product were shipped in the first half of 1998, with a suggested list value of 263.8 million dollars. This represents a 17% unit increase and a 24% increase in dollars compared to the same period last year. The figures reflect a rate of growth that's twice what the overall industry experienced in the first six months of this year. At midpoint 1998, the Latin music industry held a 4.5% share of the 5.8 billion dollar U.S. music industry. In mid-1997, that share was 4.1%.

Genres in 1998. Throughout the year 1998 full-length compact disc sales were fueled by a steady flow of top releases that spanned all genres, bringing a greater number of music buyers with diverse tastes into stores. Rap and Hip-Hop mega-hits, women artists, special box sets, soundtracks, and teen product all helped propel a spectacular year for the U.S. music industry. The biggest success story of the year was undoubtedly the growth in Rap and Hip-Hop. Lauryn Hill, Beastie Boys, Jay-Z and DMX delivered blockbuster releases. Numerous female artists reached Platinum or Multi-Platinum levels including Celine Dion, Shania Twain, Jewel, Sarah McLachlan, Sheryl Crow, Mariah Carey, Brandy and Alanis Morissette. Box sets by Bruce Springsteen, Garth Brooks and others proved to be immensely successful, and movie soundtrack hits such as City of Angels, The Wedding Singer, Armageddon and Hope Floats joined the wave of popularity begun by Titanic early in the year. And finally, the purchasing clout of younger music buyers buoyed such artists as Backstreet Boys, Hanson, 'N Sync, Monica, and the Spice Girls.

Looking at the genres in 1998, Rock and Country maintained their decade-long domination of the market, although Rock continued to decline, dropping from 32.5% in 1997 to 25.7% last year. The absence of hits from established Rock artists, the continued decline of the Rock sub-genre, Alternative (down from 11% to 9%, not broken out on the chart), the shrinkage of buyers in the 20-24 age bracket, once a stronghold for Rock, may all be contributing factors to Rock's decline. With 14.1% of the market, Country remained stable and was able to maintain its second place market position. Meanwhile, the hot genres of 1998 were R&B, Gospel, and Soundtracks. R&B growth (from 11.2% in 1997 to 12.8% last year) came mainly in the 35+ age group, and can be attributed to the success of artists such as the triple-Platinum award winner Lauryn Hill, Brian McKnight, Lavert, Sweat & Gill, Erykah Badu, Jon B. and Janet Jackson.

Right: Kirk Franklin of the Nu Nation Project

Gospel surged from 4.5% in 1997 to 6.3% in 1998, showing the greatest market growth of any genre. Its increasing popularity over the past three years is due largely to the cross-over success of a number of Gospel/Christian artists who appeal to R&B, Pop, Country and Rock fans. Of particular note last year was Kirk Franklin's The Nu Nation Project, which certified Platinum and peaked at number seven on the Billboard album charts, Lee Ann Rimes' Your Light, DC Talk's Super Nation, and Spirit by Grace's Steady On. Also extremely popular were the children's video Veggie Tales, and the inspirational soundtrack to The Prince of Egypt. Other blockbuster movie soundtracks — including City of Angels, The Wedding Singer, Armageddon, Hope Floats, and the Titanic of them all — propelled this genre's growth from 1.2% to 1.7% last year. And Classical enjoyed a healthy year (2.8% to 3.3%) also driven by purchases of Titanic which, with sales of more than 10 million, is the best selling orchestral soundtrack in history.

Age groups. Why do the buying habits of consumers fall off as they grow older? That's one of the frequently asked questions to the RIAA. The association's answer is, that this observation is not quite true, although research has shown that a consumer's need for new music tends to decrease with age, especially among women. Reasons range from obvious factors such as diminished leisure time, to the declining role music plays in a consumer's emotional life and self-identity. In addition, the RIAA says, there is a general perception among older consumers that today's music does not measure up to that of their youth. RIAA adds to this remark, that there's hope, however, for the industry because as adults pass middle age, their music buying frequency rises. Their increased purchasing suggests that 45-plus consumers have greater discretionary income and more leisure time.

Still, as would be expected, younger consumers tend to be the most active buyers of music product. In 1997, 25.7% of all recorded music was purchased by buyers younger than 20 years old. Record buyers age 20-24 accounted for 13.8%, while three age groups — 25-29, 30-34, and 35-39 — each represented approximately 11% of the market. There was a decline in the 40-44 group, which accounted for 8.8% of purchases. However, the share of consumers age 45 and older was the greatest gainer among all buyers, up 1.4% to 16.5% of the market. Analysts credit the increase to the diverse recordings of artists ranging from Bob Dylan and Elton John to Celine Dion and Michael Flatley of Lord Of The Dance fame. Meanwhile, at the other end of the spectrum, popular younger acts like the Spice Girls and Hanson contributed to the solid 1% growth in the 10-14-year-old segment, earning it an 8.9% market share. This segment was the only age group under 34 to show an increase.

In 1998 the trend towards an older purchasing demographic continued. In fact, consumers over 30 were the only age demographic to show any growth last year. Consumers 35 years and older accounted for 39% of the units purchased in 1998 compared to 34% 10 years ago. In 1998, 12% of all purchases were made by those 50 years of age and older compared to just 6%, 10 years ago. Country and Pop dominate the music choices made by these mature consumers, accounting for 51% and 53% respectively of all purchases within these genres. According to the RIAA, the continuing drop-off in the proportion of purchases accounted for by 15 to 24 year-olds (32.2% in 1996 versus 28% in 1998), once the mainstay of the market, is puzzling. Potentially, the association thinks, the rise of the internet as a free entertainment center, and the accompanying availability of free MP3 music files, could be contributing factors. Also the purchase of music videos seems to depend on age. Given the artists whose videos dominate the Multi-Platinum list in 1998 — Backstreet Boys, Hanson and 'N Sync — this growth is, as the RIAA supposes, apparently fueled in large part by younger music buyers.

Gender. Who bought what made 1997 and 1998 interesting years for the recording industry, especially in regard to gender. In 1997 for the first time ever, females purchased more music than males. Due in part to the incredible popularity of Elton John's tribute song Candle In The Wind — which lured new and infrequent buyers into stores — 51.4% of music product purchases were made by females in 1997. Males accounted for 48.6%. However, this shift was no one year incident.

Left: Mariah Carey: one of 1998' attractions for women over 30?

Continuing the trend in 1998 women accounted for a higher percentage of units purchased than men (51.3% versus 48.7%). Women over 30 accounted for the largest share of purchases, and their genres of choice were Pop and Country (65% and 60% respectively). This increase in buying among older women can be attributed, according to the RIAA, to the Titanic "phenomenon", along with the success of artists such as Celine Dion, Shania Twain, Jewel, Sarah McLachlan, Sheryl Crow and Mariah Carey. Conversely, men under 30 outpaced their older counterparts, and Rock dominated their purchases followed by a combination of R&B and Rap (62% and 51% respectively).

Some conclusions. There are several conclusions to be drawn from this overview of RIAA's data. Of course there's the phenomenon of the growing proportion of women buying recorded music. Then there is the downward trend for Rock. If this trend continues at the rate it is going, the genre may be eclipsed by other genres — like R&B, Rap and Dance — or fusions between them in the year 2000. Next there are some facts, not stressed by the RIAA, but nevertheless important to mention. Remarkable is the downward slope of the mean price of single CD's. Corrected for inflation, in 1989 in the U.S.A. the mean price of a single CD did lay around 7 dollars. Since then it has steadily gone down to arrive at 3.7 dollars in 1998. At the same time, the mean price of full-lenght CD's, also corrected for inflation, dwindled from 18 to about 13 dollars, meaning the industry had to sell more and more products to realize their sales margins. The downward trend in single purchases shows that here the industry did not succeed. "1998 was actually a stable year for singles — it was the previous year that was an anomaly because of the impact of the Princess Diana tribute," said Paul Newnham, senior vice president of WEA Corporation and co-chair of the RIAA Market Research Committee. He may be right as Elton John's Candle in the Wind 1997 set an all-time RIAA record as the highest certified single ever. But the signs are that the single hausse has stopped definitively. Most regular single buyers come from the younger age group and, as the RIAA itself thinks, they are now trying out the new format of MP3. If this really is the case, then the distribution of MP3 on internet really may become an important outlet. Maybe it is time for the RIAA and the IFTI to stop their defensive attitude toward MP3.

RIAA glossary

Direct and special markets: Targeted consumer environments in which product purchases are made without physically "walking" in to obtain merchandise. Examples include purchases made through mail order, or by responding to television advertising. Some special market programs feature certain conditions or terms under which product is available. Examples include record clubs.
Distributor: A business operation that provides music product from record manufacturers to one stops, rackjobbers, retail and other outlets for ultimate sale to consumers. Distributors often provide marketing and promotion support to record labels and retailers.
Dollar value: The monetary worth of a stated quantity of shipped product multiplied by the manufacturer's suggested retail price of a single unit. The value of shipments is given in U.S. dollars.
Domestic market: A term used here to refer to the U.S. consumer market.
Mass merchandiser: A very large retail chain that sells a variety of goods, including recorded music. Such stores include Wal-Mart and K-Mart.
One stop: A wholesale source for music product, primarily used by independent record stores which purchase product from there for retail sale.
Product configuration: Any variety of "delivery system" on which prerecorded music is stored. Various music storage/delivery mediums include the full-length CD album, CD single, cassette album or single, vinyl album or single, mini-disc or VHS music video.
Rackjobber: A business concern that obtains product from distributors for large discount department store chains, such as Target and Wal-Mart.
Record club: A mail order operation in which consumers become "members." In some cases, members commit to purchasing a specified number of recordings.
Returns: The quantity of unsold product from a retailer or other outlet that is returned to the distributor.
Units shipped: The quantity of product delivered by a recording manufacturer to retailers, record clubs, and direct and special markets, minus any returns for credit on unsold product.

The annual RIAA Sound Recording Consumer Profile is compiled by Taylor Nelson Sofres Intersearch (previously Chilton Research Services) from a monthly national telephone survey (TNS Intersearch surveys 3,051 music buyers each year). Data from the monthly survey, tabulated annually and semi-annually, is weighted by age and sex, and then projected to reflect the U.S. population age 10-and-over. The reliability of the data is +1.7% at a 95% confidence level.