Wednesday, 22 January 2014

US Digital Album Sales down 6% for the first time since ITunes. Why?




For the first time since Apple opened its Itunes music store in 2003, US digital music sales have fallen last year. Interesting data from the reputable Financial Times.

Why?

They've dropped by about -6%, and downloads account for about 70% of that market (which shows you how much record shops have suffered) to well over a billion units. Of which Apple now controls about 70%.

The reason why is streaming - music rental.

Itunes Radio is one reason where people hear songs in a radio playlist supported by advertising. So if they switch to Itunes Radio, they are less likely to buy from ITunes.

Might be a case of shooting yourself in the foot? We will see.

Spotify also people to choose the songs they want to hear for a monthly fee. Deezer similarly.

Monthly fees might stabilise the market but it will defeat downloads. I don't necessarily need to buy the song, just listen to it. 

But artists and music company revenue is worse in monthly streaming.... generating licence fees of circa 7,000 usd which is equivalent to about 12,000 bought downloads. Only. Beyonce's latest album had about 830,000 downloads in three days.

And of course, there's the monthly free streaming options out there which don't generate hard core revenue but rather a share in advertising. Worse again if you're a record label.

It's a sea change in the manner in which music is distributed and hence the impact on downloads. Will people want to just rent an album rather than buy it? If they do, there's a long hard road ahead.

However, it's hard to feel sorry for record labels. They spent years fighting it instead of embracing it and now find themselves dictated to by the market.

For once.