Peter Kafka

Recent Posts by Peter Kafka

Music Sales Slump Again

cloud musicHey, isn’t the music business supposed to be rebounding?

That’s presumably why SoftBank offered $8.5 billion for Universal Music — that’s $2 billion more than anyone thought the music label was worth — earlier this year.

And that’s presumably why Universal’s current owner, Vivendi, turned the Japanese telco down.

But someone forgot to tell U.S. music buyers about the recovery: Retail sales were down 4.6 percent in the first half of the year, according to Nielsen Soundscan.

For the last decade or so, whenever you wrote a story about the music industry’s never-ending slump, you would note that while sales of CDs were plummeting, digital sales were growing. Then you noted the hopeful theory that one day increasing digital dollars would replace vanishing analog dollars.

But this year you can’t write that: While digital album sales were up 6.3 percent, sales of individual digital tracks were down 2.3 percent.

What Nielsen’s numbers don’t tell you is how much impact streaming music, whether it’s from free services like YouTube and Pandora or from paid services like Spotify, are having on the music industry. Nielsen said the total number of audio and video streams was up 24 percent in the first six years, but bear in mind that’s usage, not revenue. And music labels make a lot more money when they sell a song than when someone streams a song. [UPDATE: Nielsen says Pandora, which is almost certainly the biggest digital streaming service in the U.S. — it streams more than a billion hours of audio a month — isn’t included in its totals, which means it is undercounting streaming usage].

(Important: Don’t assume that the decrease in digital download sales is caused by the increase in streaming. Digital sales, primarily via iTunes, have been slowing for a long time. And Spotify in particular has been arguing that most of its users are people who weren’t buying music, anyway — an argument that music label executives seem to accept.)

Still, the streaming numbers alone may be enough to convince some optimists that music really will make a comeback. Last year, Warner Music Group said streaming dollars accounted for 25 percent of their recorded music revenue.

Maybe if those numbers move fast enough, increasing streaming dollars will replace vanishing download dollars.

Wait a minute …

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