And as Savannah Haspel, vice president for media relations at IBISWorld confirmed to me, Pandora (P), Spotify and iTunes (AAPL) be damned, the damage is nowhere near done. Worldwide music sales are expected to continue to crater through 2018, to $26.3 billion from $27.6 billion, she said.
Investors most definitely cannot merely subtract today's $27.6 billion music sales from 2004's $49.5 billion in revenues to take a $22 billion or so Digital Age loss. Remember, we're talking about sales here -- the lifeblood of market cap. Every dollar not earned was not "not earned" just once, but lost over and over and over through the past decade.
Assume that at the industry's height -- say in 1999 -- the average music consumer spent $50 per year on music. That's a reasonable three CDs bought per year at $15 per CD. Then figure that there's roughly a 3 billion-person global music market -- or the half of the 6.8 billion global cellphones that can buy a song or stream music. If we multiply that $50 average per-user spend by today's 3 billion person worldwide music consumer market, we get a fabulous $150 billion per year in expected music sales.
Now comes the damage: If we back out today's $27.5 billion sold worldwide, that leaves a massive $123 billion or so in lost music revenues. Give these missing sales a conservative 10-times revenue public-market valuation and that's $1.3 trillion in missing market music industry cap -- about equal to what has been destroyed in all violent storms since 1900.