As Digital Sales Soar, CD Sales Slide

Despite tremendous interest in music, iPods, and all things digital, the recording industry continues to flounder.

This comes as no surprise: The industry has fought technological change, and is more a victim than a driver of events. Their lack of strategic vision and leadership vaccuum continues to plague the industry, which remains directionless and at odds with their fan base. 

How out of touch brain damaged is the industry? In 2005, sales of digital music were included in the annual report for the first
time
(duh). Revenue from
digital sales nearly tripled, to $1.1 billion from $400 million. How incompetant do you have to be as a group to refuse to acknowledge the fastest growing part of your industry? Its truly astonishing.

Here are some interesting factoids on the music industry:

• Global music sales (CDs, DVDs, and digital) fell
3% to $21 billion in wholesale revenue; But on a retail basis, the
industry generated about $33 billion in sales last year, a decline of
2.4 percent.

• Music CD’s fell for the sixth
consecutive year;

• CD units fell 3.4 percent (music DVD’s were flat); that’s a 6.7 percent drop
in the value of CD purchases;

• 618.9 million CDs were sold in 2005 — that’s down 19% from the 762.8 million sold in 2001.

• Global digital sales continue to rise, generating revenues of $1.1
billion in 2005;

• Apple’s iTunes has about 80 percent of the market for legal digital downloads;  subscription-based pricing models Napster and Rhapsody are the leading competitors for the remaining share;

•  In the U.S., overall shipments of music products, including
CD’s and digital albums and singles combined, fell 3.9 percent last
year

• US Sales of CD’s and DVD’s combined generated about $6.4 billion, a decline of 9 percent.

• Gnarls Barkley’s hit song, Crazy, was the first track to top the singles charts based on internet sales alone – even before it went on sale in
shops.

• Coldplay’s album "X&Y" was the biggest-selling album of the year, selling over 8 million copies; It was
also the biggest-selling digital record of the year in the U.S.

• Markets with the strongest digital sales — United States, Japan,
Britain, Germany and France — were generally the best performing
markets overall for Music.

• Singles continue to dominate digital sales,with single-song downloads accounting for 86
percent of online purchases.

The next battle will be over variable pricing, something the labels are gung ho to pursue. The major labels agreed to Apple’s "one-price-fits-all" model three years ago. When Apple’s license is expires, however, the labels are expected to push for higher prices, especially for new hit releases.

I suspect this could drive fans back into the arms of P2P networks . . .

>

 

UPDATE April 3, 2006  2:05pm

Chris Anderson notes that the 3 categories of digital — ringtone ("mobile"), subscription (Rhapsody, Napster) and download sales (iTunes, et al) all enjoy significantly higher margins on digital distribution because there are no physical goods to manufacture and ship.

In theory, 2005 may
have been more profitable than 2004
(it certainly was for Warner
Music Group
).

Music_sales

Source:  The Long Tail



>

 

Sources:
Music Industry Posted Their Sixth Year of Decline
JEFF LEEDS
NYT, April 1, 2006
http://www.nytimes.com/2006/04/01/business/01music.html

Is it the end for the CD?
Dayle Crutchlow
Coventry (Trinity Mirror), Apr 4 2006
http://tinyurl.com/ktoap

Apple’s iTunes Leads Soaring Digital Music Sales
AP,  04/03/06 5:00 AM PT
http://www.ecommercetimes.com/story/entertainment/49710.html

Record Industry Pushes Apple to Raise iTunes Prices
Jennifer LeClaire
MacNewsWorld.com,  ECT News Network
04/03/06 12:02 PM PT
http://www.technewsworld.com/story/49727.html

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