A little investigative journalism can go a long way, and Moses Avalon has turned up something rather curious: the numbers that the RIAA uses to talk about "sales" are actually just numbers relating to shipments. The gist of it is pretty simple: the RIAA has their own tracking system based on units shipped, while Nielsen Ratings bases their Soundscan tracking system on actual barcode-scanned purchases. The problem is that Soundscan shows a 10% increase in music sales when comparing the first quarter of 2004 to 1Q 2003. Yet, the RIAA insists that music sales are down. Avalon suggests that sales aren't down, only shipments are. How can that be possible? Simple: in the past, the RIAA always shipped considerably more units than were sold. Why the change? Retails stores simply want less inventory, so they order less, even though they are selling more.

Roger Goff, an Entertainment lawyer in Los Angeles confirms that, indeed, retail has reacted this way in the Post-Napster era. "Retail used to buy 10 weeks-worth [of records] and now they realize, in most cases, they don't have to carry more than two weeks-worth." In other words, retail has adapted to more of an "on demand" model (similar to the Internet) as opposed to the, accepting-tons-of-product-shoved-down-the-pipeline model record companies imposed on them in the past.

In other words, the supposedly woeful state of CD sales isn't all that woeful after all. Retail outlets have been working hard to keep up with online competition, and part of that has meant following the rule of Dell: don't have inventory if you can avoid it.

The problem is, if this report is correct, then something seriously wrong is afoot. If more units are being sold and fewer units are being shipped, then that means the total cost-per-CD is actually in the RIAA's favor. That is, with all things being equal, more sales and fewer shipments ads up to more profit than before, because there's less overrun and less returns from retailers who can't move product. Thanks to Jack for sending this in.