Monday, January 26, 2015

The Death of Music Sales


If CDs are "dead," so is iTunes.
Lucas Jackson/Reuters
CDs are dead.
That doesn't seem like such a controversial statement. Maybe it should be. The music business sold 141 million CDs in the U.S. last year. That's more than the combined number of tickets sold to the most popular movies in 2014 (Guardians) and 2013 (Iron Man 3). So "dead," in this familiar construction, isn't the same as zero. It's more like a commonly accepted short-cut for a formerly popular thing is now withering at a commercially meaningful rate.
And if CDs are truly dead, then digital music sales are lying in the adjacent grave. Both categories are down double-digits in the last year, with iTunes salesdiving at least 13 percent.

The Death of Purchased Music
Nielsen

The recorded music industry is being eaten, not by one simple digital revolution, but rather by revolutions inside of revolutions, mouths inside of mouths, Alien-style. Digitization and illegal downloads kicked it all off. MP3 players and iTunes liquified the album. That was enough to send recorded music's profits cascading. But today the disruption is being disrupted: Digital track sales are falling at nearly the same rate as CD sales, as music fans are turning to streaming—on iTunes, SoundCloud, Spotify, Pandora, iHeartRadio, and music blogs. Now that music is superabundant, the business (beyond selling subscriptions to music sites) thrives only where scarcity can be manufactured—in concert halls, where there are only so many seats, or in advertising, where one song or band can anchor a branding campaign.
Nearly every number in Nielsen's 2014 annual review of the music industry is preceded by a negative sign, including chain store sales (-20%), total new album sales (-14%), and sales of new songs online (-10.3%). Two things are up: streaming music and vinyl album sales. Somewhere in America, an enterprising sociologist is fitting this into an interesting theory about how the emergence of new technologies in media ironically amplifies our interest in pop-culture anachronisms.
So what about vinyl? It is rising, yes, rising like a wee baby phoenix, from a prodigious pile of ashes. Nine million two hundred thousand vinyl LPs were sold in 2014, up 51 percent annually, even faster than the growth in video streams. Nine million is a lot more than zero, but commercially speaking, its overall impact on the market is meager. Vinyl accounts for 3.5 percent of total album sales. The CD market (which is dead, remember) is 15-times larger.
And how about the hits? The top 1 percent of bands and solo artists now earn about 80 percent of all revenue from recorded music, as I wrote in "The Shazam Effect." But the market for streamed music is not so concentrated. The ten most-popular songs accounted for just shy of 2 percent of all streams in 2013 and 2014. That sounds crazy low. But there are 35 million songs on Spotify and many more remixes and covers on SoundCloud and YouTube, and one in every 50 or 60 online plays is going to a top-ten song. With the entire universe of music available on virtual jukeboxes, the typical 3.5-hour listening session still includes at least one song selected from a top-ten playlist that accounts for .00003 percent of that universe. The long tail of digital music is the longest of tails. Still, there is a fat head at the front.
DEREK THOMPSON is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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