November 29th, 2005

Filed under:
Music
3 Comments »

Digital Music Sales Can’t Stop the Hurtin’

Despite the apparent explosion in digital music sales in 2005, apparently it’s not a big enough bang to staunch the bleeding for regular old music retailers:

According to Fulcrum Global Partners, the number of digital tracks sold grew 192 percent from Q1 2004 to Q1 2005. That rate slowed to 175 percent from Q2 2004 to Q2 2005. In Q3 the rate slowed even more, to 129 percent from 2004 to 2005. So far in Q4, the rate has fallen to 111 percent from 2004 to 2005. With physical music sales declining at a 6.9 percent clip a year, the report estimates that digital downloads will have to maintain rates of growth upward of 150 percent.

“Digital sales have grown dramatically year-over-year in 2005, but with growth slowing drastically, it appears increasingly hard to believe that digital will grow fast enough in 2006 to offset mid-to-high single-digit declines in physical music sales,” said Richard Greenfield, one of the authors of the report. “It will take several months for this problem to begin to manifest itself.”

Another interesting factoid: While the installed base of iPods quadrupled from 2004 to 2005, the average number of downloads per iPod was almost halved, from 31 to 16. That’s mainstream adoption for you. Every Tom, Dick and Harriet has an iPod now, and fewer of them are alpha customers. Also, if they’re including the iPod Shuffle in that analysis, there’s less room and therefore less motivation to purchase music.

The article doesn’t offer any analysis, so we can only speculate on what’s causing the slowdown. to do so, I’d look at competing entertainment options, and see which of those are enjoying increasing growth: DVD sales, PVRs, gaming consoles, online games. It’s just a guess, but I’d imagine they’re impacting digital music sales.

Comments: 3 Responses so far

Damian
November 29th, 2005
6:50 pm

Bottom line, music is too damn expensive; why super artists get to be trillionares?; they just go to a recording session for 1-2 weeks and earn millions of dollars in revenue.

Why? because they can sing?, people who fight cancer, aids and that contribute the world in a more direct way should be earning millions instead.

Society is fucked up.

[Reply]

Megan
November 29th, 2005
9:59 pm

i like cd’s. i like the liner notes. makes me feel like i own something, instead of a file on my computer…

[Reply]

Derek K. Miller
November 30th, 2005
11:34 am

I think it’s not only competition from DVDs, video games, and so on, but also that download purchases are for single tracks rather than entire albums.

Since the advent of the CD, singles have fallen off the map as a revenue source for the music industry, until iTunes came along. And the difference in revenue from a $15 or $20 CD to a $1 song is pretty significant. When people can pick and choose what they like, they end up not paying for the filler they previously would have been locked into in CD format.

I’d like to suggest that podsafe music is having an impact, but I doubt that yet, except for a very small minority. No matter the protestations of many of us techies, file sharing is likely having an impact too, if only because people can figure out whether something sucks before shelling out for it.

[Reply]

Add a comment