RIAA is the trade association for the U.S. record industry. It is the counterpart to the Motion Picture Association of America (“MPAA”), which is the trade association for the U.S. film industry. One of their activities is compiling and disseminating statistics pertinent to each of their respective businesses. I have maintained a database of RIAA and MPAA information since 1970. I have strived to collect data separate data each year since both the RIAA and the MPAA tend to adjust their figures retroactively in response to various unknown (but undoubtedly dubious) factors. They also drop previous years’ statistics from their publications and websites after a couple of years, which makes it impossible to discern historical trends. Even so they are a better proxy for record sales than so-called “chart share,” particularly in the pre-SoundScan era.
Figure 1 depicts the manufacturer’s suggested retail list price (“MSRLP”) for net U.S. shipments from record labels to the stores they supply as compiled by the RIAA (“net shipments” means gross sales less returns). It also depicts gross domestic theatrical box office admissions as compiled by the MPAA. As neither the RIAA nor the MPAA adjust their data for inflation I undertook to do this for them. I used the gross domestic product (“GDP”) implicit price deflators prepared by the U.S. Department of Commerce, Bureau of Economic Analysis on October 1st of each year. The current series is 2005 = 100. At the inception of the data set RIAA sales primarily comprised vinyl LP records. Later it came to include audio cassettes, then compact discs, then digital downloads. To a large extent the MSRLP is an imaginary number. The actual average wholesale price to retail record stores is somewhere between 40% – 50% of that amount.
The MPAA numbers also by and large are imaginary. The actual average license fee to theatrical exhibitors is approximately half of that amount. Particularly since the early 1990s, motion picture distributors receive a majority of their income from other sources including television license fees, sales of video devices (at first, VHS tapes; now, DVDs) and international sales.
While of course there are many exceptions domestic theatrical box office gross remains the best proxy for these additional revenue streams. The MPAA numbers frequently are criticized on the ground that actual theatrical box office admissions are declining and the only reason why they keep going up is because of increases in ticket prices. I did not attempt to constrain for this effect. My objective was to maintain as much compatibility as possible between the RIAA data and the MPAA data.
As illustrated by Figure 1 there are two interesting things about these statistics. The first is that the U.S. record industry peaked in the late 1990s and has declined ever since on both a “real” and an inflation-adjusted basis. On an inflation-adjusted basis the film industry peaked approximately six years ago and has been declining ever since. Even then it has remained far less volatile than the record business.
The second point is that all four data series have converged. My interpretation of this is that both record sales and theatrical box office admissions both have become increasingly marginalized as consumers are presented with other consumer entertainment software alternatives and substitutable competitors for leisure time expenditures, particularly including the Internet and video games. For further analysis of this dynamic see Epstein, E. (2010) The Hollywood Economist.
For further discussion, see this post.