If Only Digital Made Cents

Every year, digital keeps booming – but the pie keeps shrinking.

And to illustrate the trend, here’s a year-by-year breakdown of physical and digital percentages, with the broader size of the pie scaled to overall recording industry revenues. These are US-based revenue figures supplied by the RIAA; figures in $millions.

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24 Responses

  1. soniquarium

    First, what you post make zero Cents. Digital Sales are in their infant stages. Physical Sales have been around for decades as the norm.

    It will take time for Digital Sales to catch up in Volume as, it’s cheaper to by a Digital EP than an actual EP. So, volume is key.

    I think people will pay more than 99cents to $1.29 for good digital music. Right now the market is over saturated with do many digital choices and soon, the bad apples will fall and thin out the lot.

    I am making far more money on a regular basis than I ever did when Selling EPs. I do not get boxes of EPs back that were not sold by the distribution teams. I do not have to eat the 1000s upon 1000s cost of pressing Vinyl or “CD”s up front.

    Now, from my studio, after mastering, I upload my release right onto the Itunes store. Cost me 10 bucks for a UPC code for that release and a little on the back end that Apple Takes. Then, the 1000s i save from not having to have product in hand, I then spend on marketing and driving traffic.

    Digital might not be good for the Majors, but it is awesome for small Techno Stars like me. My nitch is far smaller than the POPULAR and LAME music out there on “PHYSCIAL” and Digital. But yet, I’m making money.

    Of course, if you can not sign with Apple direct and you have to to through middle men like TUNE CORE, INGROOVES, etall. Of course your profits are gona drop. CUZ YOUR PAYING A MIDDLE MAN!

    • @madktc

      I’d be curious to see how you go through apple direct bypassing the middleman. Other than the occasional placements/marketing/in’s that a tunecore/ingrooves can provide it would save bands big bucks to know how to do this.

      Please indulge me/us.

      Or write me: music@ktcmgmt.com

      • MisterSoftee

        I think DMN’s had articles on it. Apparantly it’s complicated, tunecore et al make it much much easier.

    • Comedy Guy

      Soniquarium-

      You make some great points. Artists have more options than every before. It is indeed an exciting time to be an artist!

      Don’t be so quick to dismiss distributors such as INgrooves. I use INgrooves and, for a reasonable fee, they distribute my music to hundreds of online storefronts arounds the world, collect on my behalf (believe me not all are as quick to pay as iTunes) and help me manage online promotions across multiple storefronts and mobile carriers.

      I agree that the music market will eventaually settle down a bit and a more stable and manageable business will emerge. Until then, the name of the game is to stay creative, be open-minded about business and try new things.

    • Anonymous cowardly stranger

      If you can not make money on your album because you have to pay tunecore, thebizmo or reverbnaiton less than fifty bucks to distribute it all over the world…… Then maybe you might want to delay your next release until you actually have a customer base. Either that or see distribution for what it currently is for most artists; a way to start promoting yourself through visibility.

    • MusicTweetMusic

      What does the gross margin pie look like over the same time? When you compare the total costs of recording, pressing, packaging and marketing over the years – is the profit greater?

    • paul

      @Vail

      Yes, see the updated article. Every individual year is loaded.

      /paul

  2. MDTI

    IS there a breakdown of what is in the “physical digital formats”… i mean i guess Audio CD is 99.9% but would still be interested to know the figues of Blue Ray audio or other minor – but HiQ – formats (once was SACD… etc). even if it is 0.0001 % it would still be interesting to have a breakdown of the other physical digital formats….

    • paul

      @MDTI

      You’d be surprised, there’s a lot of them, many close (or equal to) 0 in many years: DVD Audio, SACD, 8-track. Actually the biggest surprise upon researching this for you was a somewhat substantial ‘Music Video’ category (which is not downloadable music videos or performance revenue/YouTube).

      • MDTI

        Thanks a lot paul…

        Music videos, interesting: those might be live concerts on DVD… or best of video compilations… i suppose (from what i could buy myself 😉

        Close to zero.. mmm, this is not good for my business plan 🙂

        • paul

          Well, keep in mind that this is a top-level view of formats, it doesn’t say much about the potential for niche, high-end audio plays as businesses (that’s really a different analysis).

          And, on the digital side, there are certainly plays for higher-end users. That includes Jimmy Iovine, and storage and delivery becomes more and more accommodating every year. So perhaps the umbrella of high-end fidelity audio is the best way to look at this one.

          /paul

          • MDTI

            Yes, ifwell targeted, there are possibilities for those formats (after all, SACD wasn’t so bad, it failed mainly because this format was not universally adopted by all music company (format war may be), which is less the case for Blu-Ray for example. There is a “Blu RAy Audio” format, but which is completely unknown by the public, and would allow 44.1/24 bit (or more).

            to be continued…. 🙂

  3. Surprised

    I am a little surprised that Apple does not charge artists to be on iTUnes. After all Apple has to host millions of files and account for them even though the vast majority cost way more to host than they will ever earn Apple. If I was them I would temper peoples urge to release stuff by charging an annual fee per track and or album .

    Artists need to stop feeling so $#! entitled and concentrate on impressing me and other fans so we really want to see them/buy their stuff etc.

    • Patrick Landreville: Bald Ego

      Apple was never interested in making money by the selling of music. The point of selling music for Apple is to entice consumers to purchase Apple products. No one would buy Ipods, etc. if there was not a readily available source of music at a discount price to fill those devices with. That is why the initial price point of 99 cents per download was set across the board regardless of the quality or popularity of any particular tune.

  4. croels

    It would be interesting to see this also against overall sales of games, movies, applications (on phones), and other digital/physical entertainment products.

    I’m pretty convinced that the lower sales in music as a product are due to a wider availability in the last 15 years of other digital and physical entertainment products. If a kid has a 30 quid budget for entertainment, my guess is most of it will go to games rather than music, while this was going to music mostly previously.

    I might also be wrong, but would love to see the numbers.

    • MDTI

      It is absolutely true that the “gamer” domain is a very active and competitive market. Gamers buy the hardware and the games….

      and they are also interested in getting good speakers/headphone and seek quality, to maximize the ambience of the game. I see this every week on gamers and pc news forums.

      So gamers are important because they can be interested in music, but to say the least, they have changed the listening format from stereo to home theatre or 5.1/7.1 be it hi quuality or cheap speakers, but there are people who are seeking a listening experience in that segment.

  5. Dave

    Thanks for this excellent graphical representation of the trend in music sales. Really puts a sharp point on it.

    Although I have no proof of this, I would attribute the shrinking pie to the “unbundling” of albums through the option to buy all songs as singles. In days of yore, to get the big hit, you would have to buy the whole album. This was revenue maximizing for sellers.

    In my opinion, the only way to increase the overall size of the revenue pie is to increase the price of the hits or re-introduce “the album,” i.e. re-bundling, or a clever combination of the two. The “all-you-can-eat” subscription model will not drive revenues to any significant degree, as the money in the business is in selling copies of the music, not merely “access” to “a copy” that you do not own. The value is in the “owning” of “a recording” of an artist.

    New and creative approaches to pricing and bundling will happen, I predict, and the pie will bottom out and then start growing again.

    davidbrett.blog.ca

    • WILL

      Back in the day you didn’t have to buy the album to get the hits as they came as singles prior to album release. In effect, the singles were what got fans to buy the album – great singles must mean great album.

      • MDTI

        funny, that was not my behavior (and friend’s) in the 80’s…

        The single were on TV/radio all the time. It could direct you to a few artists (i began doing music because i wanted to do the same as the guys on that video that i loved), but it wasn’t the only way to be informed. On the contrary, when you are teen and underground inclined, you have a tendancy to avoid what comes from official channels.

        we bought record of bands that would not make a single. we went in record shops, and took the time to listen to the first 20/30 seconds of 3 or 4 songs of the albums…

        All the friends made sure they wouldn’t buy the same LPs, so we would meet on week ends and make recordings on tape cassette and shared them that way (which was legal; re VHS cases – i underline this point of legality because i’ve seen the reactions from people of major companies when i said that 😉 ).

        Was really another time 🙂

        • MDTI

          (continued)

          Whereas nowadays, my feeling is that you buy a CD/digital album only when you really want to support the artist, or when you want to listen to the best sound available.

          For the rest, you go to youtube and find everything there 😉

        • Patrick Landreville: Bald Ego

          @MDTI In regard to your comment about making copies of recording being legal I am afraid you’re misinformed as to the law. The VHS cases you refer to address making copies for yourself which is in fact legal but the moment you gift or sell a copy you have broken the law. This has been true since the inception of copyright law.

  6. alternative view

    Artists have to start thinking of something called the long tail. More albums, bigger catalog, more money in the long term. Stop thinking as a rock star, start thinking as a painter. Get it? 🙂

    (and keep sending those DMCA notices, not let the parasites breath!)

  7. Nashville

    Would be curious to see this research filtered by genre. Would also be interesting to see the overall physical to digital percentage should skew compared to the overall market share.