Global Digital Music Sales Up 40 Percent, But Overall Sales Down 10 Percent

The sale of digital music globally hit $2.9 billion in 2007, up 40 percent from 2006. But, as we’ve seen in the U.S. alone, that was not enough to offset the 10 percent decline in overall music sales to 17.6 billion, according to a report by the International Federation of the Phonographic Industry. Digital sales now account for 15 percent of the global market. Compared to other industries, music is second only to games in its transition to digital revenues. For newspapers, it is 7 percent, for films it is 3 percent, and for books only 2 percent. (All of these are global figures).

In the U.S., however, digital sales account for 30 percent of industry sales, according to the IFPI. (Nielsen SoundScan, however, says digital music accounts for 23 percent of sales in the U.S., based on different data). The report also looks at mobile sales of digital music, including ringtones. While online sales of digital music in the U.S. are nearly double those of mobile sales, there is some evidence that gap might close (or even reverse) as mobile data networks become faster. In Japan, for instance, 91 percent of digital music sales are mobile and 40 percent are full-track mobile downloads (the rest are ringtones).

Other stats from the report:

—There are more than 500 legal music services worldwide, ten times as many as four years ago.
—About 6 million individual digital songs are available legally.
—1.7 billion digital tracks were downloaded legally last year, up 53 percent.
—Tens of billions of songs were swapped illegally.
—The ratio of unlicensed tracks to legal tracks downloaded is 20 to 1.

Link to TechCrunch Article

Digital Music: Just A Band-Aid For Music Industry's Gaping Wound

DIGITAL MUSIC WON'T SAVE THE recording industry, according to a new study.

Despite the growth of digital spending to one-third of the U.S. consumer music market by 2012, it won't be enough to offset the decline in CD sales, according to JupiterResearch, a New York-based research company.

The study projects that digital music sales, including subscription services and downloads, will triple to $3.4 billion in 2012 from $1.04 billion in 2006. Digital sales this year are expected to hit $1.3 billion. But gains in the online business aren't expected to reverse the industry's overall slide--with total revenues estimated in 2012 at $10.1 billion, down from $11.6 billion in 2006.

"Digital music won't be enough to restore growth for the industry or replace the lost CD sales of the past," according to the report authored by Jupiter research director David Card. "But it's the only sector where there's significant growth."

Digital sales haven't replaced CDs on a one-to-one basis because on-demand subscription services appeal only to a niche audience of serious music fans, while downloads generally amount to only a few a year. Online spending geared toward singles priced at 99 cents each can't make up for the declining dollars spent on albums priced at $13 or $14 apiece.

"Everybody listens to music...but a lot of people don't spend a lot on music," Card tells Online Media Daily.

The study doesn't envision advertising playing a big role in online music anytime soon. On one hand, users say they would prefer an ad-supported on-demand music service to a typical subscription model that charges $10 to $15 a month. But Jupiter finds that existing licensing practices make ad-driven music ventures difficult. "It's hard to imagine anyone selling $8 to $10 worth of ads per user per month, when there is hardly any audio advertising online," according to the report.

SpiralFrog, the most high-profile ad-supported music effort, launched last August after a series of delays and the departure of then-CEO Robin Kent. On Tuesday, privately held SpiralFrog reported a third-quarter loss of $3.4 million on revenue of just $20,400. In exchange for free tunes, users view advertising on the site while downloading music. But SpiralFrog so far offers only about 800,000 songs compared to other services such as iTunes and Rhapsody, which have at least 2 million songs each.

"There's no question in my mind that there will be an ad-supported business model that will emerge eventually, but not one that will emerge right away to make up for declining CD sales," Card says. The report notes, for instance, that Rhapsody and Napster have both introduced limited ad-supported offerings to lure new customers.

Despite the challenges, the study encourages music labels and publishers to seek out new licensing revenue streams through advertising and ringtones, as well as both online and terrestrial digital radio. "The industry needs to work hard on these things and experiment boldly, because artists have to get paid at end of the day," Card says.

Link to MediaPost Article

British Paid Downloads Cross 150 Million Mark

The British recording industry has now sold 150 million paid downloads, according to information shared by the Official UK Charts Company and label trade group BPI. The tally represents a modest acceleration for the UK-based paid download market, and the BPI appeared bullish on both digital and physical trends.

In March of this year, paid download sales topped the symbolic 100 million mark, a per-month rate of roughly 5 million purchases. The latest benchmark ups that monthly rate to roughly 6.25 million. Across the pond, the United States is experiencing far headier sales levels, and concerns of a possible market plateau.

Elsewhere, the BPI pointed to a broader surge in holiday quarter sales, though year-end totals will be closely watched. The holiday action is being led by heavy-selling debut artist Leona Lewis, who threatens to outstrip a first week debut sales record previously established by the Arctic Monkeys. Elsewhere, a number of stars recently pushed past the 100,000 sales mark during their opening weeks, including James Blunt, Westlife, and the Eagles. But despite the strength, broader sales issues linger. During the summer, the BPI disclosed a rather pronounced dip in first half sales, a development that reversed an earlier resilience by the British recording industry.

Link to Digital Music News Article

Japanese Recorded Industry Experiences Difficult First Half

Physical recorded asset sales declined markedly during the first half in Japan, part of a global downturn. According to figures released by the Recording Industry Association of Japan, or RIAJ, physical formats dropped 9 percent during the six-month period to 129.6 million units. In terms of value, sales totaled 156.6 billion yen ($1.29 billion, 936.4 million euros), a dip of 6 percent. Meanwhile, music DVD sales slipped one percent to 25.0 million units, and 3 percent in terms of value.

In terms of domestic and international repertoire, domestic catalog fared the best. Domestic artists powered a 75 percent share, though unit sales within the category dropped 7 percent. International artists claimed the remaining fourth, though overseas discs dropped a pronounced 16 percent. The RIAJ has not yet disclosed digital asset sales, a key element of the mix.

Link to Digital Music News Article