Digital Music Sales Drop in 2013; Is That Surprsing?

2014-01-09 14.14.34.pngFor the first time since digital music sales have been recorded, Billboard reports that digital track sales fell 5.7% [...] while digital album sales fell 0.1%, according to Neilsen SoundScan, which tracks such sales. CD sales also dropped 14.5%.

This is no surprise. As you can see in the graphic to the left, music sales are competing with free. Spotify and other services – Pandora, Rdio, iTunes Radio – offer free ad-supported listening along with paid premium services.

As a serious, long-time music fan, I still like to own my music. But I use iTunes Radio to discover music I wouldn’t have heard other than at random. (I have a $25 per year iTunes Match subscription, so I don’t hear ads.) I’ve been fiddling with Spotify, but I’m not sure I can justify its cost. With the ad-supported “free” version, I get an ad every two or three songs. It’s not that big a deal; I just press the Mute button on my remote (I mostly listen at my desk), but if I were listening more often, it would irk me.

It’s fair to say that we’re living in a world where people don’t generally care about ads any more. My guess is that anyone who listens to enough music to be bothered by the ads will pay for the premium, ad-free service. In fact, with Spotify, 25% of users pony up, while 3/4 of listeners are ad-freeloaders. The casual music listeners – those who don’t spend a lot of money on music anyway – put up with ads. But the serious listeners pay the $10 a month and stop buying CDs.

It would be interesting to try and figure out how much money that represents in lost sales. Spotify says that the average music listener in the US spends $55 a year on music. However, those who pay for streaming services certainly spend more than the average on music, and would have spent much more than the $120 they spend on Spotify. So the music industry is most likely losing out.

While I’m still not ready to move to subscription listening for a number of reasons, I spend several hundred dollars on music each year. If I were to stop buying music and pay a monthly fee to Spotify, that would be a big dip in my expenditures, and a net loss to the music industry. (And most of the music I buy is on CD, not digital.)

Some people have suggested that it’s not streaming that has hurt the music industry but apps. This is foolish; people are certainly spending time with apps, but that doesn’t stop them from listening to music. And it’s not a question of how much money they spend on apps; the same people who listen to ads on Spotify are happy to view ads in free versions of apps. And even if they do buy apps, most just cost a buck or two.

The way people listen to music is certainly changing. It’s not just streaming services, either. Lots of young people just go to YouTube to hear their favorite new songs. In many, perhaps most, cases, these YouTube videos are illegal uploads. (YouTube makes it quite difficult for record labels to take down illegal uploads.) Some of them aren’t even videos; they’re just a single still of an album cover with the music behind it.

The music industry has struggled for years to figure out the best way to make money, since digital music came along. It still doesn’t have the answer. Streaming services most likely reduce overall revenue, and are merely a temporary band-aid. There’s got to be a better way.

P. S.: I think it’s pretty disingenuous of Spotify to be running ads like this:


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10 replies
  1. Bryan Schmiedeler says:

    I am old school like you as far as wanting to own my music. For me, iTunes Radio is for discovery or for something seasonal like Christmas music.

    Seems that it would be natural that on-line music sales would have to peak sometime, and it may not be due to streaming but simply to saturation and decline in music sales. Would be hard to disentangle what caused what.

    • Kirk McElhearn says:

      I agree. Overall music sales are dropping, and it’s facile to blame all of this on piracy. Streaming is just the latest variable that’s been added to the mix.

  2. Scott Atkinson says:

    I have a lot of cds and digital files, but I think more and more that it’s all too complicated, costly and eats too much space and time. I’m also coming around to the argument that a well encoded lossy file is as good as a cd, in terms of sound quality. (Not there yet, but blind ABX tests are very convincing.) Add to that the fact that internet connections are really pretty reliable these days, and I have fewer arguments for not just subscribing to an online service, a Spotify or MOG, or using iTunes Match and being done with it. If that means I’m renting instead of owning, I *think* I’m ok with that.

    • mikey says:

      Except using iTunes Match means you still have to pre-own the music, before it matches it to your iCloud account (if Apple have the music, which they often do not, so they have to upload your version instead, if it works properly, which it often doesn’t as Apple have not fully baked the service to make it work properly).

      And lossless isn’t just about matching CD quality, it’s about higher quality 24/92 or better, but more importantly it’s about being able to convert said music into another format in future should you need/want to (lossy transcoding means losing further quality), i.e. the owner of the music controls what they do with their own content in future, and not the seller/provider, as it is at the moment.

      Streaming services are obviously biting into actual sales in an ever larger degree… clearly, people who once spent £10 on a single CD/download album so maybe spending £500 on music annually, compared to the same album price on all-you-can-eat monthly plans so only £120 annually, are spending considerably LESS on music annually. A much lower percentage of the monies going to artists/labels accordingly.

      But the question is how many pirating users are instead stopping doing that, and instead are signing-up to these streaming services. I’d suggest only a small amount, as anyone with any commonsense realises that any one provider will only have a percentage of what they want to listen to, so these services are gimped in their very premise.

      I’ve checked-out many services for both music (e.g. Spotify, et al), and others for video (e.g. Netflix, et al), and they are quite frankly useless, as they just do not have the content. Any one music service has only a fraction (20-25% maybe) of the music I want. And the video services are even worse, missing 90% of the stuff in my IMDB ‘want to see’ list; any I’m not talking about highly obscure stuff here.

      These services would have to charge 3-5 times the amount they do now to make-up for the sales loss amount, whilst also offering several times the libraries they currently have available, and link-in with local ‘owned’ libraries seamlessly, before they might be a decent option. But of course the more you offer, the less money to go around to each artist, so it’s a vicious cycle that likely will never be squared.

      The more I think about the ins and outs of such all-you-can-eat services, the LESS I think they are the way forward for the entertainment industries. They should be competing on QUALITY, offering lossless (CD and upwards) for the same price as the lossy they currently do, with proper booklets, and decent high-res artwork quality. The tech companies control this and not the artists/labels, but they should be putting pressure on tech co’s like Apple (as the market leader, especially them) and other digital stores, to improve the tech they rely on to deliver their content to end users. Currently, this is something they seemingly refuse to do, instead resigning themselves to the status quo.

      …and they wonder why people pirate.

      • Scott Atkinson says:

        Well, I’d be happier with lossless cd quality – though I don’t care at all about “better than cd” – but my overall point is that as a music lover, I’m increasingly attracted to the ease of offloading the chores of keeping track of all my stuff to someone else.

        There was a time not so long ago when I delighted in pawing through my cds; lately, firing up iTunes seems a whole lot easier, especially with Apple Match. Add to that the fact that I cannot hear the difference between an uncompressed lossless file and a lossy compressed 256k aac file and, well, you can see where this is going.

        Although I want lossless for some of the reasons you cite, like being able to convert from one format to the other without losing quality, it ain’t a hill I’m willing to die on anymore. I just did another ABX test this morning, comparing Ken Peplowski’s version of the Beatles’ “Within You, Without You,” which I had as an aiff rip (not even Apple Lossless!) and a 256k copy purchased from the iTunes store.

        I ran five tests and got:

        - Test 1, 60 percent

        - Test 2, 60 percent

        - Test 3, 60 percent

        - Test 4, in which I buckled down, really, really concentrated, 80 percent.

        - Test 5, repeating the same effort as test 4…20 percent.

        All my straining to hear tiny differences amounted to…guesswork. I’m getting convinced that there’s just not much day to day utility in straining to maintain a large music collection in an inconvenient form, if you have other options.

        • mikey says:

          How is lossless (ALAC) any more inconvenient than lossy (AAC) anyway? They’re both computer files at the end of the day, just one bigger than the other. If iTunes implemented a “quality” setting on the device (see similar idea they currently do for HD film quality: ) then you could easily just select “AAC” on your (smaller storage, & often lower ‘mobile bandwidth’) iOS devices settings, and “ALAC” on your (larger storage, larger ‘broadband’) OS X devices; if they bothered to offer it.

          As for making life easier. That’s another point in the ‘streaming services vs. locally owned content’ debate…

          Firstly, if you re-read the couple of paragraphs above from “I’ve checked-out many services for both music (e.g. Spotify, et al)…” where I mentioned the issue of the **highly limited library** of content available using such streaming services.
          That’s the biggest gimped factor in their very premise.

          i.e. for music content, you have to sign-up for one or more streaming music service(s), AND still have to maintain additional music not found on said streaming service(s) in your own private locally stored library in order to get all the music you want, AND as something like Spotify playlists are not integrated into your local iTunes (or other database software) collection, you can’t mix and match ‘streaming stuff’ with ‘owned stuff’ inside playlists and the like.

          Secondly, yes, I hear you; sure managing this yourself is (arguably) more of a pain to do, and life’s busy so why bother. BUT, imagine the pain when licensing issues remove tracks you love from your streaming services playlists anyway – which they always do, BTW.

          An example I can recall that happened to me recently was with a video service, but it’s the same with music ones too. A couple of weeks ago, I was watching the beginning of classic Italian film “The Bicycle Thieves” on Netflix UK at the beginning of the week, then went back a couple of days later to see the other half, only to find it had (f^%king annoyingly!) disappeared “due to licensing issues”. (Though being Netflix I could ‘spoof’ location to finish it, as luckily it was seemingly still licensed in other Netflix countries at the time, lol! Though most services cannot be spoofed such as Netflix can, and/or the film could have easily been removed from ALL Netflix country sites anyway). Plus I noticed a load of other titles I had gone to the trouble of adding to my watchlist had been deleted from my watchlist too, thus I had wasted my time adding them in the first place.

          So streaming services are NOT the answer people think they are for their media needs (nevermind the industries who get paid a pittance ‘per play’). And can be MORE trouble than ONESELF owning (thus controlling) it.

          So the issues are deep and varied, but “convenience” is only convenient when it works for you and not against you. Often it’s the ‘idea’ people like, but they don’t actually consider the negatives in as much depth as they could before jumping to use.

          (TIP: BTW, Plex is really great for owned video content IMO. One master library on your computer/external storage with metadata drawn from online master databases [imdb, etc.], that can either be transcoded on the fly to local Plex apps if you have network connection wherever you are in the world, or instead can be downloaded if preferable to you at the time. With plugins for your iTunes music collection, Spotify, Netflix, BBC iPlayer, et al, too. Tis pretty good!)

          • Scott Atkinson says:

            Said Mikey: ” “convenience” is only convenient when it works for you and not against you.”

            True that, and I have no argument with your well-reasoned post. I’m more reflecting my own frustration at a.) not being able to get full cd quality downloads and b.) having to manage an unwieldy pile o’ cds. But here’s the thing: the more I live with iTunes Match, the more I think not having a physical copy is a feature, not a bug. I bought Tomasz Stanko’s “Wislawa” off iTunes earlier this week, have been listening to it on decent headphones for the last couple of nights, and am…satisfied. A couple of times I’ve had the pang of “Well, I really should have a full cd quality copy, physical, for back up” but then I’ve thought how wonderful it is to not have another item piled up, on a shelf, in my basement or spare bedroom.

            Granted, Apple could go out of business or change the terms of iTunes to make them so onerous I wouldn’t use match. Or I could lose my job and my ability to buy broadband internet. In both cases I lose.It’s also possible that (I’m 57 now) by the time I’m 67 or 77 I’ll have simply lost track of what I “own” digitally, and it will vanish. Those are all real risks, not to be dismissed lightly.

            On the other hand, worrying too much about what the future holds for my *stuff* interferes with my ability to enjoy it in the here and now. I’ve been thinking lately that my attention is a limited resource, one that I need to use wisely. If I don’t have to spend a lot of it doing the care and feeding part, so much the better.

            Right now, I’m at the “still buy music but buy it online, cd quality when I can, aac otherwise” point. Think I’ll stay here for a bit.

            • Scott Atkinson says:

              Forgot to mention, you’re right about Plex. I’m a longtime XBMC user, (hacked one of the original XBoxes to run it way back when) and have played with Plex a bit.

  3. Scott Atkinson says:

    At the risk of monopolizing the thread (sorry, Kirk!) one other point: finding simple, cd quality downloads can seem downright risky.

    For instance, I wanted the Busoni late piano music collection on Hyperion, which is about $50 on cd, $27 on iTunes. I could buy flac/alac files directly from Hyperion for roughly $34 (which is what I did) but it meant exposing my card to European banks I don’t know, and don’t know if they’re trustworthy.

    Right after that, I discovered I can download Black Saint/Soul Note albums (great label from the 80s) in lossless from the CamJazz website, but again, I have no idea who I’m dealing with for credit/debit card payments.

    I probably just need to get out more, but given the number of data breaches we’ve seen lately, it makes me uncomfortable, gives me another reason to stick with iTunes.

    • Kirk McElhearn says:

      I can strongly recommend Hyperion. I know them very well. And, have a look at their buying system: if you buy more than a certain amount – and it can be a credit to use later – you get a discount. It can go up to 25% if you buy enough.


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