Thursday, October 4, 2012

What A Growing Digital Music Sales Market Really Means

Nielsen announced on Tuesday that digital track and album sales are on track to break new records. 

That's old news if you follow SoundScan numbers on a regular basis. Records in both categories were set in 2011 and both categories are up this year - digital albums are up 15% and tracks are up 6%. 

The fact that digital track sales are up again in 2012 carries a couple of important implications that Nielsen didn't get into.

First, digital music is not a zero-sum game. Digital track and album sales are growing while subscription services and viewership at ad-supported music video services continue to rise. Clearly the free and paid streaming options are not cannibalizing the download options. Mumford and Sons' "Babel" set a record for best debut week in 2012 while besting Spotify's streaming record by over a factor of three. That's only one example, but it's one of many examples that indicate streaming services and download services are managing to coexist with one another.

Second, more people are involved in the digital music market. This ties into the fact that digital music is not a zero-sum game. Consumers now have more options in streaming services, from ad-supported video services (like Vevo) to audio subscription services (such as Spotify) and smart cloud-based music lockers (think iTunes Match).

An NPD Group study
 found that the number of paid download buyers in the U.S. increased 14% to 45 million in 2011. With the growth of innovative services that expand the size of the digital music market - Cricket's Muve Music, Rhapsody's partnership with MetroPCS, Spotify's freemium model - it's safe to say more consumers will be involved in digital music in a meaningful way in 2012.

But the slowdown didn't last. Track sales picked up near the end of 2010 - around the time LimeWire was shut down - and have steadily grown ever since. A number of factors could have contributed to download growth: a resurgence of pop singles, widespread adoption of song identification apps Shazam and SoundHound, better marketing of digital albums and more competitive pricing are just some of the possible reasons. But there's no denying that digital music sales have continued to rise as digital music has been made more accessible.

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