Digital Music Sales Fall But Exceed Brick and Mortar
09. Apr, 2010 
7 Comments
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For the first time since 2003, when digital track sales soared, the U.S. digital song market fell. According to Nielsen Soundscan, album sales fell 7.9% to 82 million units, while track sales fell 1% to 312.4 million units. SoundScan did adjust for a 53-week year in 2009, eliminating sales from the first week of January 2009 and in ended its quarter on April 4, 2010. I don’t think other retailers or market research firms that track other markets will be doing this.
Apple’s recent price increase of single tracks to $1.29 in the iTunes store may have impacted consumer demand. It’s interesting that Apple’s increased track pricing resulted in slower industry sales, when on the other hand Apple’s encouraging a race to the bottom in app pricing in the App Store due to the store’s financial dynamics among developers. A larger percentage of iPhone apps are trending towards free going forward, and developers are seeking in-app purchasing of content, new features, and now in-app advertising as alternative revenue streams to the original sale. Music tracks do not have this type of opportunity in iTunes or anywhere else.
As far as market share, Universal Music Group remained in the top spot in Q1 2010 at 30.3%, followed by Sony Music Group at 27.9%, Warner Music Group at 19.2%, and EMI at 10.5%, according to Nielsen who’s SoundScan site is currently down and being relocated.
As far as distribution channels were concerned, chain retail album sales fell 33.8% to 19 million units, mass merchants fell 4.1% to 27.7 million units, while non-traditional channels (iTunes, Amazon, concert halls, etc.) grew 13.3% to 28.7million units, and independent channels grew 10.3% to 6.6 million units, compared to a year ago.
I think it will take a few more quarters to see if Apple’s latest iTunes track pricing strategy will truly signal a slow down in online music sales. If the economy continues to improve slowly, and music sales continue to slip, once could point to price inflation as a probably cause. I think another dynamic is consumers upgrading their iPods to iPhones, which switches the focus from tracks to apps. Even iPhone owners upgrading to the iPhone 3GS have tended to emphasize apps more as the number of apps in the iTunes App Store exploded to over 120,000. It will also be interesting to see if the iPad will have any impact on music track downloads, as it obviously will on apps. Another more subtle impact to declining online sales could be coming from the lingering popularity of services such as Pandora, Lala, and others that stream music for free, including Internet Radio with many commercial stations broadcasting content.
So it’s notable that digital sales now far exceed retail sales, but that digital sales have started to stagnate.
-Randy Giusto
@randygiusto
@newdigitalcafe
#newdigitalcafe
randygiusto@newdigitalcafe.com
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