Graph compiled from NAMM 2007 Global Report

 

 

 

 

 

 

 

 

 

 

 

 

 

What do the numbers say?

For those of you who received the 2007 NAMM Global Report, page 28 reveals a somewhat disturbing trend in the Computer Music Market in the United States over the last 10 years. Essentially, the growth in computer hardware peripherals is far outpacing the growth in Software sales. As the graph shows, in 1997 the total U.S. sales of sound cards was about 15 million dollars and the total sales of music software was about 85 million dollars. This means that the sales ratio of software sold to sound cards sold was 5.66 to 1.

As you can see, both sound card and software sales have increased appreciably since 1997. However, this increase in sales has not been proportional and it is possible that within 2-3 years the sound card sales will overtake software sales entirely. Every year the ratio of software sold to sound cards sold has decreased gradually. Why is this significant?

Who really needs a Sound card?

When the average citizen of the USA (or any country for that matter) buys a computer, 99% of them pay little or no attention to the quality of the sound that is coming from the built-in electronics. Today, the sound of the average computer rivals that of the audiophile CD players from 10 years ago. So the bottom line for most people is that this is more than good enough for games, movies, mp3 and other aspects of normal computer life.

Now who goes to a music store to buy an enhanced sound hardware? This is most likely someone who is taking music creation to a higher level. This is someone who has started to take his/her music seriously enough to start to frown on the audio circuits that tens of millions of other people find perfectly good. I would call this person a potential customer for music software. We can expect that a lot of these upgrading customers would also want to get better software tools, that are better matches for their new audio hardware. This is where our expectation comes from. We expect a correlation between sound cards sold and software sold.

2003 brings Cheap Broadband

The early years of this century saw a sharp rise in broadband use in the USA. This hit a tipping point in 2003 as prices plummeted and large providers offered services over cable and regular telephone lines to the public. DSL use in the USA rose a staggering 182% from 2001 to 2003 when the number of subscribers almost tripled. During the same period, Cable internet users rose by 91% from 6.6 million users to 12.6 millions users. Overall, the number of US households with broadband access jumped from 9.9 million in 2001 to 21.9 million in 2003 - more than double. This meant that it suddenly became easier to download larger files that were prohibitive with a dial-up connection.

Home Internet Connection by technology 2001 to 2003 (millions of households)
	2001	2003	Percent Change
Dial Up	44.2	38.6	-12.7%
DSL	3.3	9.3	181.8%
Cable	6.6	12.6	90.9%
Other*	0.5	0.9	80.8%
Number of internet households	54.6	61.5	12.6%
Total number of households	108.6	112.6	3.7%
* “Other” includes 0.4 million households with satellite and MMDS broadband in 2003. The 2003 individual home connection numbers do not add up to the category total due to rounding.

This phenomenon could very well explain the sharp drop in the computer music sales ratio from 2002 to 2003. There was an explosion in sound card sales while there was an unnerving leveling of software sales. The drop indicates that about twice as many people bought sound cards in 2003 as did in 2002 but about the same number of people bought software. It is expected that software sales should keep up with sound card sales, so we are starting to see the first hard evidence of massive software piracy. The majority of new sound card purchasers downloaded illegal software to use with their new sound cards. The ratio of sound cards sold to software sold continues to fall to a record low of 1.21 in 2006. Remember, this ratio stood at 5.66 in 1997.

Exclusions and Conclusions

It would be ignorant and plain wrong for us to suggest here that for each sound card sale there must be a software sale. There are many exceptions that should be factored in. Here are some examples of who may buy a sound card but not an accompanying software tool:

• People who upgrade older sound cards with new ones
• People who choose to use the software bundled withthe sound card
• People who use sound cards for non-music related applications

What does all this mean to the music software industry? In so many words, it means that there are a lot of people buying sound cards for their music creation needs, but they don’t buy the software used with that sound card. Granted some of these sound cards come with software bundles. But even the most optimistic experts estimate that less than 10% of the bundled software are used by the people who purchase them. Let’s face it a significant chunk of these purchasers use illegal software.

Still not convinced? Here is another way to analyze this data. Sales volume of sound cards in 2006 is more than 12 times the sales volume of sound cards in 1997; however, the sales volume of music software in 2006 is only 2.7 times the sales volume of music software in 1997. Look at the above graph again. The ratio trend line is pointing in one direction. Who really needs a high quality sound card? What kind of a person is unhappy with the built-in sound? Not my brother, not my mother, not my kids, not my neighbor, just people who are creating music – potential customers of music software companies. IMSTA is trying to buck this trend. Help us spread the word. The music software industry is good for every kind of music and every kind of musician.

Do the right thing - buy the software you use