The worldwide trend is still going away from the CD and is moving to music files from the internet. In 2010, sales of downloaded music rose by 6% to 4.6 billion U.S. dollars (3.4bn euros). Meanwhile, nearly a third of the total turnover for record companies comes from digital business.

Everything is moving to the digital world and artists need to make sure they are going to be properly prepared for this shift.

Related Articles

• Advantages of Digital Distribution III: – November 11, 2008
• Australia Music Sales in Heavy Decline Across the Board – February 18, 2011
• EMI Think Apple Has Too Much Control in the Music Industry – August 20, 2010
• Digital Music Rides High in 2009 – Neilsen Soundscan Report – January 12, 2010
• IFPI – New Research On Music Buying Habits – November 16, 2009

The downside to the numbers is that ARIA reports in the same way as Nielsen Soundscan and RIAA, that is counting any transaction as one – album, download, ringtone, whatever.

However, on the upside “Australians are consuming more music than ever before,” ARIA chief executive Dan Rosen declared.

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• Advantages of Digital Distribution III: – November 11, 2008
• 95% of All Digital Music Downloads are Still Illegal – March 8, 2011
• Lime Wire Finally Closes – October 28, 2010
• EMI Think Apple Has Too Much Control in the Music Industry – August 20, 2010
• Home Taping and the Music Industry Pie – March 16, 2010

UK major label EMI this week railed against Apple’s iTunes in the body of its latest annual financial statement.

EMI are unanimous in their praise for Apple’s achievements in online music sales, but resent the huge slice of the music sales market the company has carved out. In other words they want Apple to be a large player in the online music space, but they want to see a few other services step up and compete with them on marketshare. Apple is now the biggest music retailer in the US for both the digital market and the overall music market.

This gives Apple too much control, label bosses feel. Now EMI has found this sufficiently significant to warn that a key risk to the music industry is:

“The substantial dependence on a limited number of online music stores, in particular the iTunes Store, for the online sale of music recordings, and the resultant significant influence that they can exert over the pricing structure for online music stores.”

This warning was included within the company’s most recent financial statement, in which the label confirmed continued decline in CD sales, but said digital revenues now accounted for 8.1 percent of music publishing revenues, up from 7.4 percent in the same period last year.

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• EMI Restructuring Coming in a Few Weeks: Expect More Layoffs – July 12, 2010
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• Paul McCartney Dumps EMI for Indie Label – April 22, 2010
• EMI In Trouble! Asks For Even More Money To Stay Afloat – April 21, 2010
• Digital Music Stores Compared – February 19, 2009

http://www.ifpi.org/content/library/Jupiter_Research_study_on_online_piracy.pdf

Oddly iPod owners aren’t classified as digital music buyers, and it’s not clear how these categories have been delineated or how people have been divided into them, or whether they are mutually exclusive. I wish that when research like this is commissioned it was released in its entirety, to allow us to make our own decisions about it, rather than accepting the opinions of those who publish it based on limited information release. Wishful thinking, perhaps, but it might help us get to the truth if it happened.

Related Articles

• Spotify, MOG, Streaming, Piracy and the Future of Digital Music – November 13, 2009
• UK Digital Music Market Trends – October 30, 2009
• Digital Music Store Focus – Recordstore.co.uk – October 19, 2009
• IFPI Digital Music Numbers for 2011 – January 23, 2012
• Inkysmudge – Victims Of The Internet – August 26, 2010

Not only has the singles market more than doubled in the number of units sold sine ’02, but it’s almost entirely divested itself of the physical media. This growth is not reproduced in the album market (old figures here), which in 2008 saw a shallow (compared to predictions) decline of between 3.2% and 6% depending on who you listen to, despite 68% year on year growth in digital (read people shifting over to buy digital formats rather than physical).

This is encouraging news for the music industry in the UK – despite the panic that filesharing and online piracy keeps sending through the motley ranks of the big execs, there’s not that big a downturn in sales. Music piracy is a massive phenomenon; according to the IFPI, 95% of music downloads are illegal, but is it really hurting the industry if sales are staying firm in the face of this explosion in Piracy. The BPI’s Chief Exec Geoff Taylor stated “That singles have hit these heights while there are still more than a billion illegal downloads every year in the UK is testimony to the quality of releases this year and the vibrancy of the UK download market.  Consumers are responding to the value and innovation offered by the legal services and these new figures show how the market could explode if Government acts to tackle illegal peer-to-peer filesharing.” His implication is clearly that all the pirates out there would be forced to buy their music instead of getting it free  – but I think this is something of a false premise: just because people like getting something for free, doesn’t mean they would be prepared to pay for it. I’ve been introduced to a lot of bands by people burning me CD’s or sending me tracks over the net, even way back when my teenage girlfriends used to make me mix tapes it was the same sort of piracy, but the upshot of that was that I’ve discovered more bands, been to more gigs and bought more CD’s, vinyl and downloads than I ever would have if I’d not been so freely able to share music. I strongly feel that bands should profit from people’s enjoyment and sharing of the great music they make, but it should be directly related to the cost of time effort and money involved in getting that particular piece of music to that particular person.

I would pay more for an LP than for a download because I’m getting more. Not just intangible 1′s and 0′s but a real lump of plastic and paper and design as well as the music. MP3 stores cost money to run, tech guys, ISP’s, designers and even marketing people (sadly) have to be paid, but those costs aren’t there with file sharing networks, or at least they’re not paid for by the guys in the music industry. If the site makes money, that should be shared equitably with the artists whose work they exploit, but artists should take into account that they’re not just losing download sales, they’re also gaining fans through these channels, fans that will buy tickets and albums and merchandise and write about you on their blogs and tell their friends about you, if you’re good enough, and you give them a reason to buy. *deep breath* Sorry. Rant over.

What will always be true is that supply must follow demand; if people want new ways of getting music cheaply online, the traditional market and online music stores must adapt to provide them, or fail in the competition with less legitimate routes of supply.

Related Articles

• Spotify Updates Platform With New Features – April 27, 2010
• Digital Distributor RouteNote Signs 3 New Online Music Stores – Deezer, Napster, Thumbplay – January 29, 2010
• UK Digital Bill Will Raise ISP Subs by £25 Per Year – January 6, 2010
• Hulu, Vevo, Spotify – Embattled EMI embraces new revenue streams – November 19, 2009
• IFPI – New Research On Music Buying Habits – November 16, 2009

A nice addition to their retail arsenal is a signed exclusive section, where they list special artist-signed editions of new releases (as I write Biffy Clyro, Athlete, Idlewild and Maps are among the artists listed in this section). Prices don’t seem inflated from regular retail cost, so this seems like a great way of picking up something a bit more special for a fan who’ll appreciate having an artifact rather than just a download. Other than this little bonus, I can’t see much to distinguish Recordstore.co.uk from the competition – prices are reasonably similar, the range is pretty comprehensive, but you could get the same service from Amazon. On the other hand, I support them on the same principle that makes me buy food from the farmers market rather than ASDA, the smaller retailers care more, and I think small businesses are a good thing for keeping a marketplace varied, vibrant and full of innovation. Much as we are a smaller enterprise but provide an alternative digital music distribution solution to the bigger players like the Orchard.

Related Articles

• Digital Music Store Focus – Napster 2.0 < – October 15, 2009
• Digital Music Store Focus – iTunes – October 14, 2009
• Digital Music Store Focus – Insound – October 12, 2009
• Digital Music Store Focus – iMesh – October 12, 2009
• The Self-Indulgent Friday Playlist – Girls, Boys, Alcohol and Dancing – October 9, 2009

These lawsuits culminated in Napster’s bankruptcy, and its purchase at the bankruptcy auction by Roxio (of CD burning fame) – who have converted it into a subscription streaming service. Users can pay GBP£5 a month for unlimited streams from Napster’s 8 million strong catalogue, plus 5 tracks to download and keep as MP3s. There’s also the option to buy download tracks on an a-la-carte basis once you’re subscribed. In addition to this, Napster also provides a free streaming site, with limited functionality, and access to three quarters of its catalogue. Users can’t make playlists from this site, and it’s a lot slower and harder to use than the subscription platform.

The subscription service is cheaper than Spotify Premium or eMusic, its closest competitors in terms of service, and the fact that all of Napster’s members are subscribers makes it’s income much more reliable than the advertising based model that still makes up the bulk of Spotify’s trading, (the Economist reported that only 40,000 of the 6 million users who had downloaded the free platform have subscribed to the premium service) and thus better able to provide a steady income to it’s contributing artists, were it not for the odd addition of it’s free streaming service to the mix. Napster’s operations seem a little confused, different elements pulling in different directions from one another; a steady income from the subscription service, with a clunky ad supported option detracting from it; a limited MP3 download service clashing with both and yet failing to make it easy for users to take music away from their PC’s. If they could centralise all of these elements into a neat platform and make it easy to use, they’d have a model that looked a bit like Spotify’s, but it’s yet to be seen whether that can be turned into a profitable business in the long term.

Related Articles

• Digital Music Store Focus – iTunes – October 14, 2009
• Digital Music Store Focus – Insound – October 12, 2009
• Digital Music Store Focus – iMesh – October 12, 2009
• The Self-Indulgent Friday Playlist – Girls, Boys, Alcohol and Dancing – October 9, 2009
• Digital Music Store Focus – HMV.com – October 9, 2009

Combined with the iPod, Apple’s online music store must be one of the biggest success stories on the net. They were surprisingly late on the scene; MP3’s were invented way back in 1991, eMusic’s first incarnation was born in 1998 , and the iTunes store didn’t go live until April 2003 (a year and a half after the iPod launched). Five years later, in April of ’08, iTunes overtook Wal-Mart to become the biggest music retailer in the USA, and was reported by Reuters as selling over 70% of all digital music worldwide. The IFPI calculated the global digital market as worth USD$3783.8 billion in 2008 – conflating these figures means the iTunes store turned over $2648.66 billion on music alone: by their own report, they sold 2 billion songs worldwide between January 15^th 2008 and January 6^th 2009 – OK, so the IFPI comparison gives them more than a dollar a track per sale, which isn’t the case, but the figures aren’t entirely disparate.

Here’s a breakdown (drawn from Apples published stats) of how music sales have accelerated for Apple over the last 6 and a bit years:

To save you the horror of another of my poorly structured Excel ’03 graphs – here’s one lifted from the very informative Wikipedia page that unfortunately only covers the trend up to 6billion tracks. (If anyone can recommend a better program for graphing, please tell me in the comments!)

The success of their online proposition has been underpinned by the massive success of the iPod – over 218 million units have now been sold, meaning that the average iPod owner would only need to have bought 40 tracks from the iTunes store to account for all sales. That’s less than 4 albums worth each, and I think I probably have a few hundred albums in my collection.

iPod Sales by Quarter

Unless you’re a pretty hardcore nerd, you’ll be forced to manage your iPod through iTunes, and that shop is just so conveniently placed within the same piece of software that it’s easy to see how those track sales figures come about. Even accounting for a decent percentage of hardware failures, obsolescences and droppings into a pint of beer for those iPods out there (yes, I have had all of these happen), the iTunes captive audience (don’t forget all those iMac and Macbook users) is still 150 million strong and buying hard.

Track prices are relatively high, with occasional offers and a regular set of free sample downloads from artists promoting themselves. Apple users don’t seem to mind this, and it translates into pretty good profitability for artists selling through iTunes, 65% of the revenue from each sale is piped on down to the provider of the tracks sold, and there’s no variability in per track income as with the ad-supported streaming services. RouteNote can get your music on itunes without you having to pay anything up front.

Related Articles

• Digital Music Store Focus – Napster 2.0 < – October 15, 2009
• Digital Music Store Focus – Insound – October 12, 2009
• Digital Music Store Focus – iMesh – October 12, 2009
• The Self-Indulgent Friday Playlist – Girls, Boys, Alcohol and Dancing – October 9, 2009
• Digital Music Store Focus – HMV.com – October 9, 2009

***EDIT***

Just to respond to that comment: a totally unfair comparison of someone who happened to be on Insound’s MP3 download front page when I looked, The Castanets, shows their album ‘Texas Rose…’ as being $1.50 cheaper on Amazon ($8.99) than on Insound ($10.49). Please feel free to refute me with your own research. I think Insound might deserve the extra money for taking an active interest in the bands they promote, and I hope they pass on more $ to their artists, but as a straight comparison, Amazon is cheaper (admittedly this is only one example).

Related Articles

• Digital Music Store Focus – Napster 2.0 < – October 15, 2009
• Digital Music Store Focus – iTunes – October 14, 2009
• Digital Music Store Focus – iMesh – October 12, 2009
• The Self-Indulgent Friday Playlist – Girls, Boys, Alcohol and Dancing – October 9, 2009
• Digital Music Store Focus – HMV.com – October 9, 2009

The music they offer up through their search is based on results from youtube, which streams quite smoothly in a little window on their GUI (the program window), and on the hard drives of the various iMesh users logged on at a given time (you all know how peer to peer works, right?). They have agreements with the RIAA (and thus the labels and artists listed with them) to pay royalties on streams and downloads, but they also have a vast amount of content that has not had copyright claimed. This doesn’t mean that copyright doesn’t exist in those tracks, just that the people the tracks belong to haven’t objected to their being used on iMesh’s service, which doesn’t seem particularly equitable if they don’t know its happening. RouteNote doesn’t currently do digital distribution to iMesh, but if you’re a user, you can put your own tracks in your iMesh folder to be shared. You won’t recieve any revenue thereby unless you’re registered with one of their partner mechanical copyright agencies like the RIAA or MCPS though.

Related Articles

• Digital Music Store Focus – Napster 2.0 < – October 15, 2009
• Digital Music Store Focus – iTunes – October 14, 2009
• Digital Music Store Focus – Insound – October 12, 2009
• The Self-Indulgent Friday Playlist – Girls, Boys, Alcohol and Dancing – October 9, 2009
• Digital Music Store Focus – HMV.com – October 9, 2009