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.
â€œDigital 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,â€ said Richard Greenfield, one of the authors of the report. â€œIt will take several months for this problem to begin to manifest itself.â€
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.