U.S. Music Sales Drop 5%, as Habits Shift Online
As the music industry evolves, there has been no doubt that online streaming services like Spotify, Pandora and YouTube are growing fast, and generating more revenue for artists and record companies.
The question is whether that growth is enough to offset dropping sales of CDs and downloads. The latest report on music sales indicates that, at least so far, it is not.
According the Recording Industry Association of America, which collects sales numbers from the major record companies, just under $3.2 billion in music sales was recorded in the first half of 2014. That is down 4.9 percent from the same period in 2013, the association reported on Thursday. But a closer look at the numbers shows how much music consumption patterns are changing.
In the first six months of 2014, downloads and streaming together amounted to $2.2 billion — virtually unchanged from the same period last year. But within that total, the proportions changed. Last year, downloads were about 69 percent of this category, by revenue, with the rest made up by streaming; this year, downloads were only 60 percent.
Digital sales of all kinds now make up about 68 percent of total sales revenue for the recorded music industry. Streaming outlets, which include “on-demand” services like Spotify, Rhapsody and Google Play Music All Access; Internet radio like Pandora and iHeartRadio; and even video services that use music, are now 27 percent of the whole. According to the report, 7.8 million people in the United States paid for subscriptions to digital services (up from 6.1 million at the end of last year).
The drop in download sales has been a major worry in the music business. After rapid growth following the introduction of Apple’s iTunes store in 2003, download sales in recent years began to cool. Then, in 2013, theydropped precipitously, leading to fresh rounds of questions about whether streaming services like Spotify — which let people listen to millions of songs online, charging listeners for the access or making them listen to ads — were to blame.
Strict causality between the rise in streaming and the fall in downloads may be difficult to prove to a scientist’s satisfaction. But few music executives these days seem to dispute that people buy fewer songs when they can easily stream them online, and this shift is part of the reasoning behind recent deals like Apple’s $3 billion purchase of Beats.
Among physical formats, CD sales continue to plunge while vinyl records grow into a surprisingly robust niche. Sales of albums on CD fell 19 percent by revenue to $716 million, while LP sales grew 43 percent to $146 million. A decade ago, LP sales were barely significant. But with vinyl now firmly established as a premium-priced collector’s item and an audiophile favorite, they represent about 4.6 percent of the total.
The music industry also received some good news this week. On Wednesday, Moody’s issued a report about streaming music services in light of recent deals by technology giants like Apple’s Beats purchase; Google’s acquisition of the playlist service Songza; and Amazon’s newPrime Music streaming service.
The ratings agency saw an overly crowded marketplace of streaming services, but concluded that all that competition is good for record companies, which charge the streaming outlets substantial licensing fees to use their songs.
“Technology companies’ deep pockets and intensified rivalry to attract and retain paying users within the respective ecosystems,” the report said, “is a credit positive for the content owners, providing a better return on their music catalogs.”