Who Killed the Music CD?

Aaron Pressman at Business Week has a common-sensical explanation for the drop in music CD sales: re-allocation of entertainment bucks.

Taking his numbers from an MPAA white paper on the state of the entertainment biz, he finds...

If you flip near the back to page 51, you'll see a table of how many hours a year the average consumer "spends" on various forms of commercial entertainment. In the four years from 2001 to 2005, overall time spent on these pursuits rose to 3,482 hours per person from 3,356 hours, about a 4% increase. But that didn't benefit all forms of entertainment equally. Here's a table I've created from the MPAA report showing the change in hours per person spent by activity:

Cable and satellite TV +125
Consumer Internet +52
Home video +29
Broadcast and satellite radio +26
Wireless content +15
Video games +12

Consumer books 0

Movies (at the theater) -1
Consumer magazines -3
Daily newspapers -14
Recorded music -50
Broadcast TV -65

You get the same picture when you look at the average dollars spent by entertainment consumers (from a chart on page 53). Overall spending per person rose to $890.77 a year from $675.35, a healthy 32% increase. Spending on television (cable, video on demand etc) plus home video (DVDs) soaked up more than half of the total increase. Throw in Internet spending and you've accounted for 90%. No surprise then that spending on newspapers and recorded music actually declined.