Music Industry Update February 2002

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Music Industry UpdateFebruary 2002

• Thomas Braum
• Senior Vice President
• and Chief Financial Officer
• [phone], Ext.718
• Greg Mize
• Vice President
• Investor Relations
• [phone], Ext.211

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United States - Music Industry Quarter 3 Results

• U.S. unit sales decreased by 7.1 from 271.8
  million units in 2001 Q3 to 252.6 million units
  in 2001 Q3. Configuration data reveals that
  album sales decreased by 5.5 and singles by
  49.0.
• The mass channel (for example, Wal-Mart, Kmart,
  Target and others) was the only retailer group to
  experience an increase in sales. Unit sales
  increased from 81.7 million units in 2001 Q3 to
  84.8 million units in 2002 Q3. The chain music
  retailers (for example, Musicland, Transworld and
  others) experienced a decrease of 12.6.
• Mass merchant retailers represented 33.6 of
  total unit sales - up from 30.1 share in 2001
  Q3.

Handleman Fiscal Quarter 3 Unit Sales
(Nov/Dec/Jan) (in thousands of units)
Unit Sales from Monday, October 29, 2001 to
Sunday, January 27, 2002.
Source SoundScan
Channel Share of Total Unit Sales - 2002 Q3
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Canada - Music Industry Quarter 3 Results

• The Canadian music market was down 3.6 from from
  22.5 million units in 2001 Q3 to 21.7 million
  units in 2002 Q3.
• Album sales decreased by 3.2 from 22.3 million
  units in 2001 Q3 to 21.6 million units in 2002
  Q3. Single sales decrease by 51.4.
• Cassette albums decreased by 39.6 from 990,000
  units in 2001 Q3 to 598,000 units in 2002 Q3. CD
  album sales decreased by 1.5 from 2001 Q3 to
  2002 Q3.
• The mass channel accounted for 24.3 of unit
  sales.

Handleman Fiscal Quarter 3 Unit Sales
(Nov/Dec/Jan) (in thousands of units)
Unit Sales from Monday, October 29, 2001 to
Sunday, January 27, 2002.
Source SoundScan Canada
Channel Share of Total Unit Sales - 2002 Q3
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United Kingdom - Music Industry Quarter 3 Results

• The U.K. music market was relatively flat from
  2001 Q3 to 2002 Q3. Unit sales decreased by 0.1
  from 67.3 million units in 2001 Q3 to 67.2
  million units in 2002 Q3.
• Album sales increased by 4.9 from 53.7 million
  units in 2001 Q3 to 56.3 million units in 2002
  Q3. Single sales decreased by 19.5.
• The album configuration represented 83.7 of
  total unit sales - an increase from 79.8 in 2001
  Q3. Singles represented 16.3 of total unit
  sales in 2002 Q3.

Handleman Fiscal Quarter 3 Unit Sales
(Nov/Dec/Jan) (in thousands of units)
Unit Sales from Sunday, October 28, 2001 to
Saturday, January 26, 2002.
Source CIN - The Official UK Chart Company
Configuration Share of Total Unit Sales - 2002 Q3
Source CIN - The Official UK Chart Company
5
United States - Music Industry Yearend Sales
Results

• Industry unit sales decreased by 5.25 from 838.2
  million units in 2000 to 794.1 million units in
  2001.
• Unit sales were relatively flat in 2000
  decreasing by -0.03 from 838.4 million units in
  1999 to 838.2 million units in 2000. Strong
  increases were experienced in prior years.

Industry Unit Sales By Year 1996 to 2001 (in
thousands of units)
Annual Percent Change in Industry Unit Sales
(Relative to Prior Year) 1997 to 2001
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United States - Yearend Sales By Channel

• Unit sales at the channel level indicate growth
  for the non-traditional channel. Unit sales
  increased by 30.2 from 17.9 million units in
  2000 to 23.3 million units in 2001.
• Mass merchant retailers experienced a unit
  decrease of 0.4 from 240.2 million units in 2000
  to 239.2 million units in 2001. Mass merchant
  market share increased by 1.4 percentage points
  from 28.7 in 2000 to 30.1 share in 2001.
• Chain stores or retailers continue to lose unit
  sales and share to the other channels. Chain
  unit sales decreased by 7.6 from 456.8 million
  units in 2000 to 422.3 million units in 2001.

Unit Sales By Channel 1998 to 2001 (in thousands
of units)
Unit Share By Channel 2001
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United States - Yearend Sales By
Format/Configuration

• The role of the cassette format and the single
  configuration continue to weaken. Unit sales of
  cassette albums decreased by 36.0 from 77.2
  million units in 2000 to 49.4 million units in
  2001. Similarly, unit sales of cassette singles
  decreased by 84.9. Cassette album share of
  industry sales fell from 9.2 in 2000 to 6.2 in
  2001.
• CD singles decreased by 34.6 from 41.2 million
  units in 2000 to 27.0 million units in 2001. CD
  album sales increased by 0.8 from 2000 to 2001.
  Share increased from 84.3 in 2000 to 89.7 in
  2001.
• Total album sales decreased by 2.8 from 785.1
  million units in 2000 to 762.8 million units in
  2001.

Album and Single Unit Sales 1997 to 2001 (in
thousands of units)
Unit Sales By Format 2001
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United States - Yearend Music Video Sales By
Format

• Music video unit growth may be attributed to
  further household penetration of DVD hardware and
  adoption of the DVD format. Total music video
  sales increased from 7.0 million units in 2000 to
  8.9 million units in 2001.
• The DVD format accounted for 63.1 of unit sales
  in 2001 - up from 35.7 in 2000. DVD video
  increased by 123.8 from 2.5 million units in
  2000 to 5.6 million units in 2001.

Music Video Unit Sales By Format 2000 and 2001
26.7
123.8
-27.2
Unit Sales By Format 2001
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United States - Top 20 Albums of 2001
Top 20 Albums of 2001
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