Sales of a-la-carte track downloads from platforms like the iTunes Store and Amazon are now experiencing serious declines, according to preliminary Q1 and partial Q2 data shared this morning with Digital Music News. Last year, year-over-year track downloads plunged nearly 13% according to Nielsen Music, but that figure is now slipping past 20% year-over-year, according to figures relayed by a major label source.
That drop could be more severe, with one executive projecting ‘shocking’ first-half declines for ‘more than a third,’ or 33%, though those declines could be reserved for certain genres or market segments. On the other side, high-wattage superstars like Drake could bump the average upward, sources relayed. Accordingly, drops seem especially severe for independent artists and labels, who don’t enjoy Drake-style publicity blitzes and royal promotional treatment from Apple.
But financial losses from download drop are also impacting major labels Universal Music Group, Sony Music Entertainment, and Warner Music Group. According to first quarter financial data from Warner Music Group, the smallest of the remaining three major labels, losses from download declines were greater than $19 million for just the first three months of 2016, a figure that could surpass $50 million for the year.
Those declines are easily being offset by strong streaming revenue increases: according to the figures, streaming recording revenues were $72 million for the three-month period, a figure that does even account for streaming performance and mechanical licenses, not to mention guaranteed payments from platforms like Spotify and highly-favorable advertising inventory. Those perks are far fewer in the download space.
The severe drops continue to color the picture at Apple, where sources close to the development of iTunes continue to point to a complete phase-out of music downloads over the next two or three years. Sources emphasized that downloads will continue to enjoy prominent positioning in a new, updated iTunes interface, expected to be unveiled next week at WWDC in San Francisco. But Apple Music, alongside Beats 1 Radio, are surging alongside meteoric growth, and the presence of both within the same application has been generating serious confusion and annoyance among consumers.
Speaking of confusing, the picture gets even more interesting with Bandcamp, which is now reporting solid gains on downloads in 2015. Specifically, track downloads from Bandcamp artists gained 11 percent in 2015, despite industry-wide drops of nearly 13 percent, while digital album sales gained 14 percent despite slipping 3 percent industry-wide. Amazingly, Bandcamp post CD sales increases of 10% year-over-year, though that could be an anomaly, propelled more by fan altruism than actual consumer trends.
Now, all eyes will be focused on first half download figures from Nielsen Soundscan, a group frequently accused of massaging data to appease major label clientele. But this time, it’s hard to tell where those political winds blow, especially with massive streaming gains coming at the expense of once-lucrative download sales.
Image: Tony Hisgett (CC by 2.0).
There are at least two reasons why downloads are decreasing so quickly. First is the one everyone grasps, that streaming for free is less expensive than paying for a download. The second reason is no less problematic: when everyone has been saying Apple is going to abandon / restructure iTunes, then many will assume their downloads will also disappear. Ultimately, what is the value proposition to pay for a download today when Apple is going to force you to accept Apple Music in a couple of years, and the songs you would pay for today will have no value then????
When “everyone” has been saying Apple will abandon iTunes? Yes, I’m sure your typical download consumer is paying attention to wild-eyed industry blog rumors when considering their music purchases.
It’s TIME for DISCOVERY MOMENT MONETIZATION!
(Patent Pending US, EU, India &China)
Play always the best, tease them with all kind of PLAYLISTS then charge for ADDITION to PERSONAL PLAYLIST when they live the moment and love it the most!
100,000 Radio stations converted to primitive Discovery Moment Monetization music stores will deliver $100B music industry by 2020. That will be just beginning of $200B music industry at just one million dollars per Radio station!
Wrong. It’s time for Spotify to take over the world. And it will happen sooner than you think. Mark my words.
Where is the money?
The money for musicians and NOT SO BRILLIANT Daniel Ek!
He just finished his “brilliant minds symposium” #2 – a lot of chutzpah for actually very stupid businessman giving away other people’s goods.