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Digital music sales drop: streaming services the culprit?

updated 08:44 pm EST, Fri January 3, 2014

First drop in digital music sales since iTunes was invented

According to a new report by Nielsen SoundScan, digital music sales dropped for the first time since the iTunes Store went online in 2003. Sales fell by 5.7 percent to 1.26 billion songs, with industry executives putting the blame on streaming services like Pandora, Spotify and Rdio -- services the record companies themselves licensed their music to in an effort to reduce their dependency on iTunes. Whether revenue from streaming has offset the sales dip hasn't yet been revealed.

In addition to the drop in single-song sales, digital albums sales are also down very slightly. Album sales fell 0.1 percent to 117.6 million units. SoundScan hasn't yet released its figures for streaming revenue in 2013, making it unclear if the shift in listener habits from buying to subscription services has offset the drops.

Conventional CDs still held the most sway when it comes to album sales, taking 57.2 percent. Digital accounted for 40.6 percent of all albums sold, with vinyl accounting for two percent of sales. Cassettes and album DVDs made up the remaining 0.2 percent. Though it took several years, iTunes eventually became the biggest seller of digital music in the US (2008) and the world (2010), a position it continues to hold today. The company has always taken a dim view to subscription services, saying listeners wanted to "own their music."

However, as higher-speed cellular and Wi-Fi became ubiquitous in major cities, a new trend emerged of users relying primarily on their mobile devices, rather than home entertainment systems, for listening to music. These on-the-go listeners craved a larger variety of music than could fit in the limited storage capacity of the typical smartphone, and the ability to discover new artists and songs -- leading to the acceptance among mainstream consumers for free and subscription "radio-like" services. Curated stations aimed at specific demographics and broader streaming channels of music available on demand everywhere became worth paying up to $12 a month for, leaving buyers with less money for digital or physical song purchases.

Apple eventually joined the fray, creating a free (but advertising-supported) service called iTunes Radio that has proven popular. In the US and one or two other countries, Pandora's user-created "stations" are also well-known, and Spotify has built up a worldwide audience with limited free options and subscription plans. Like many before it, however, operations like Spotify are still a point of contention among artists, many of whom feel they are not being compensated fairly for the use of their work. Spotify has taken to being more transparent about its payouts in an effort to shift the blame back to record companies.

Apple uses revenue from advertising to pay for the music it uses, and additionally pays artists or record companies when customers use the iTunes Match "music locker" service, which costs $25 per year and offers the added benefit of making iTunes Radio ad-free. The pricing makes iTunes Radio the cheapest of the options for streaming ad-free music services.



By Electronista Staff
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  1. nowwhatareyoulookingat

    Fresh-Faced Recruit

    Joined: 07-13-09

    maybe crappy generic music is the problem, where a whole bunch of producers decide to manufacture 'the next big hit'

  1. DiabloConQueso

    Fresh-Faced Recruit

    Joined: 06-11-08

    You just described the entire music industry since its inception. Much of popular music has been "manufactured" since day 1. Nothing new at all.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Originally Posted by nowwhatareyoulookingatView Post

    maybe crappy generic music is the problem, where a whole bunch of producers decide to manufacture 'the next big hit'



    Yep, which is why music sales have slumped since the 19th century, when Strauss and co manufactured cheap, generic hits, looking for a quick buck. Nobody bought sheet music, preferring to sing the classics. And it really went downhill with the industrial writing tanks of the 1930s, hitting rock bottom with the crooners of the 1950s.

    Seriously man, if you think you have any idea what you're talking about, watch "Standing in the Shadows of Motown" and Google "the Wrecking Crew" for an idea of how that industry worked to churn out formulaic hits back in the days you probably think of as great music.

  1. cgc

    Professional Poster

    Joined: 03-25-03

    Originally Posted by Spheric HarlotView Post

    Yep, which is why music sales have slumped since the 19th century, when Strauss and co manufactured cheap, generic hits, looking for a quick buck. Nobody bought sheet music, preferring to sing the classics. And it really went downhill with the industrial writing tanks of the 1930s, hitting rock bottom with the crooners of the 1950s.

    Seriously man, if you think you have any idea what you're talking about, watch "Standing in the Shadows of Motown" and Google "the Wrecking Crew" for an idea of how that industry worked to churn out formulaic hits back in the days you probably think of as great music.



    Music is enjoyable whether or not the songs were created using algorithms or the old fashioned way. I generally dislike "pop" music and prefer to stick to more soulful songs but I don't give a crap how it's made so long as it strikes a chord with my heart and soul.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    The "Old-Fashioned Way" IS using formulae and recycling themes and marketing.

    Motown was a hit factory in the 60s because they figured out a formula for the music and filled the marketing with completely artificially constructed identities and saleable faces.

    Absolutely no hit record ever was designed by automated algorithms.

  1. coffeetime

    Mac Enthusiast

    Joined: 11-15-06

    In my case, I end up buying more songs because of the iTunes Radio and Pandora. They introduce me to new songs/music that I had never heard of.

  1. Charles Martin

    MacNN Editor

    Joined: 08-04-01

    Top 40 music has always been crappy, at least as long as I've been alive. I agree with coffeetime, iTunes Radio (Pandora, et al) help me find out about new artists I may wish to buy. I can't see myself wasting money on a subscription fee though (well I'm already using iTunes Match so that doesn't count), seems like at the end of the day I have nothing to show for it (I'm aware that the same could be said of cable TV, that's why I gave it up).

    It appears that the record companies are guilty of screwing recording artists by paying them less for streaming (ie Spotify) plays than for regular airplay on radio. If that's true, then its yet another reason to push for the end of the record industry as we know it and towards a more creator-friendly compensation system. I have **no** problem paying for music I enjoy, I just want at least half of it to go to the artist(s).

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    It's not the record companies who aren't paying the artists for steaming.

    If you think that's the case, you really haven't been paying attention.

  1. Jubeikiwagami

    Fresh-Faced Recruit

    Joined: 12-27-11

    Reissue Barney's greatest hits album. That should jump start the industry!

  1. shawnde

    Fresh-Faced Recruit

    Joined: 04-01-08

    I remember back in 2004/2005 when the record companies were scared of the success of iTunes and wanted to find a way to break the "golden handcuffs" (Universal Music was famous for this), and they kept saying the future is in "subscription" and streaming. Of course that never panned out then, because mobile hadn't happened ..... and then they brought on Amazon to sell below cost in order to change the $0.99 model. Well, Amazon strong-armed them to lower their wholesale cost, which cut into their margins a bit. And now, they've been in a frenzy signing up every streaming service they can get, so that they can contain iTunes ... again.

    The whole thing is bizarre, because they make MOST of their money on iTunes and other track sales like Amazon, since they don't have the overhead of CD's. And now that they've found out streaming doesn't pay, they're complaining that "oh ... we're losing track sales ... F$CK !!! ... who's idea was this streaming thing anyway?" ..... they're just a bunch of greedy clowns which are run just like the mafia, and despite their many years in the business, they simply don't understand new business models.

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