For investors, the lesson is that it's tough to buck the odds. Established players almost always fail to adapt to change. It's the nature of a free market.  WSJ story about music sales reminded me of the accelerating drop in old-fashioned film sales that Kodak has experienced over the past few years. So you won't be surprised to learn that if you look at the five-year stock market performance of the 130 or so sub-industry sectors tracked by Morningstar, radio, film and TV producers, broadcast TV, advertising and media conglomerates are five of the 12 worst performers, the very worst.

Here's the context:  The S&P 500 averaged a 6% annual gain over the past five years, the small-cap Russell 2000 rose 12% a year and even the Lehman Brothers Aggregate Bond Index climbed 5% annually. Meanwhile investors in media conglomerates saw their stocks rise less than 3% a year, in advertising just 2% and in TV broadcasters less than 0.3% annually. Owners of film and TV producers lost 1% annually and radio investors burned down the house losing an average of 9% a year over the past five years. Ouch.

Ironically, given all the complaining that the Motion Picture Association of America does about piracy, my entire "it's just that simple" thesis is spelled out in the back pages of very informative research report that the group issued on the state of the 2005 U.S. entertainment industry. If you flip near the back to page 51, you'll see a table of how many hours a year the average consumer "spends" on various forms of commercial entertainment. In the four years from 2001 to 2005, overall time spent on these pursuits rose to 3,482 hours per person from 3,356 hours, about a 4% increase.  But that didn't benefit all forms of entertainment equally.

Here's a table I've created from the MPAA report showing the change in hours per person spent by activity:

• Cable and satellite TV +125
• Consumer Internet +52
• Home video +29
• Broadcast and satellite radio +26
• Wireless content +15
• Video games +12
• Consumer books 0
• Movies (at the theater) -1
• Consumer magazines -3
• Daily newspapers -14
• Recorded music -50
• Broadcast TV -65

You get the same picture when you look at the average dollars spent by entertainment consumers (from a chart on page 53). Overall spending per person rose to $890.77 a year from $675.35, a healthy 32% increase. Spending on television (cable, video on demand etc) plus home video (DVDs) soaked up more than half of the total increase. Throw in Internet spending and you've accounted for 90%. No surprise then that spending on newspapers and recorded music actually declined.

• Read More.. Music CD, I'm just not that into you