Download Sales Keep Plummeting, So Streaming Better Pick Up the Slack
With digital music sales skidding, Spotify and its ilk could be the industry's only hope
Gentle friends, start your streaming. No, really, stream up a storm. Knock yourselves out. The music business could depend on it. Downloads, the numbers suggest, are steadily going the way of the iPod.
Sales of digital downloads grew for a decade, helping record labels make up for falling CD revenues. But last year downloads declined for the first time since Nielsen SoundScan started keeping track, in 2003. That goes for both individual tracks and entire albums. And so far this year, download sales have only dropped off further.
As Billboard reports, citing SoundScan, digital track sales are down 11.9 percent through the first three weeks of 2014. Digital album sales are off 13.3 percent. That accelerates the previous trend: For all of last year, digital albums edged lower by less than one percent, while digital track sales slid six percent.
Not coincidentally, streaming services continue to gain. The launch this week of Dr. Dre, Jimmy Iovine, and Trent Reznor’s Beats Music was popular enough the company temporarily stopped taking new sign-ups to fix some glitches. Pandora boasted 76.2 million users at the end of last year. Rdio just rolled out an unlimited, ad-free service. Apple’s iTunes Radio and Google Play Music All Access entered the field last year, with a reported YouTube subscription service and Neil Young’s audiophile-ready Pono still on the way. According to SoundScan, overall music streams were up 32 percent in 2013 with 118.1 billion.
If download sales keep declining at their current pace, it’ll cut into the record labels’ income. So-called track-equivalent album sales are down 12.6 percent for the first three weeks of the year. According to Billboard, that would work out to a roughly $60 million drop in download revenue for a major label with a 25 percent market share. And considering download sales were on a downhill slope in 2013, falling more from the previous year with each passing quarter, even a 12.6 percent drop-off looks pretty optimistic.
So expect record companies to keep pushing streaming companies to fill in the gap. There’s a reason Beats will be running a Super Bowl ad. Value remains in the ongoing debate between Spotify CEO Daniel EK and musicians such as Thom Yorke over how much of streaming revenues go to artists; meanwhile, artists like Four Tet are doing valuable experiments in digital DIY. But unless vinyl’s resurgence becomes exponentially bigger — and railroads reconquer the automobile, which actually might not be so terrible — streaming looks like the obvious future for the music industry.
If standalone MP3 players have given way to Internet-connected mobile devices, the money in the music biz is rapidly heading the same direction. Maybe more rapidly than expected.