The sky is falling.

This chart was recently picked up and published by Business Insider, Daring Fireball and various other places, often with melodramatic titles such as “The death of the music industry”.

There are some major problems with this graph:

1) The numbers are not adjusted for inflation. This is a very basic tenant of graphing visual data. One must account for inflation when graphing monetary amounts over years. Otherwise the results are simply irrelevant. Tufte would not be happy.

2) These are stats from the RIAA. America only. The chart is for some reason labeled “Global.” In 2009, the ifpi (worldwide riaa) reports sales of 15.8 billion dollars.

3) The type of graph specifically masks and trivializes the growth of digital, enhancing the sob story. The ifpi says that between 2004-2009 digital sales are up 940%. (Ok, ok, that’s kind of cheating because pre-2004 there were virtually no digital sales, but hey, the point is digital has been growing quickly).

I needed to investigate. I said 10 hail marys, voluntarily paid the RIAA $25 (gasp!) to access their data, and dove in.

Here’s the actual situation, properly adjusted for inflation, and using a normal line chart instead of a complicated stacked area chart.

Yup, the industry is certainly losing money compared with 10 years ago. But armed with accurate data, another way we can describe the size of the recording industry is “pre-CD.” We can also reasonably say that each format grows and then dies out. Digital is certainly on a very quick rise.

Let’s zoom in and take a closer look at how formats have been adopted. Let’s look at the first 6 years of data for each format. Adjusted for inflation, of course:

The first few years of digital saw much quicker adoption than CD, and both blew away the lazy adoption of cassette. Digital sales appear to be doing fairly well, though 2010 (not show on graph) supposedly only saw 6% growth. There is fear that the growth is leveling off.

My opinion would be (of course) that we’re are only really seeing the start of digital innovation. Unlike cassettes or CDs, there’s many different kinds of digital formats, many more ways to collect revenue, and a slew of tech companies innovating (on behalf of or in place of the industry itself).

Personally, I find the sob stories from the RIAA just plain insulting, especially as the blame lands on piracy instead of their own failures to kickstart digital distribution. As can be plainly seen, digital music was not really being sold by major labels until 2004. This is very very late to the game. This is 3 years after napster shut down.

Also, chew on this: How would that sales chart look if major labels didn’t bother distributing on CD format until years and years after consumers were demanding it?

And since we apparently all love melodrama, here’s my childish version of the original misguided chart.

EDIT: Wow, Michael DeGusta had almost the exact same critique of the chart and beat me to publishing. He provided many more pretty and accurate visualizations in his followup article on Business Insider. The REAL Death Of The Music Industry