Music Downloads are Nearing Extinction as Sales Tank 27.4%

photo: onecrazykatie (CC 0)

Song downloads tanked nearly 30% during the first half of this year, according to US-based stats from Nielsen.  So how long does this format last?

Hey, the woolly mammoth also had a good run.  But despite a decade of relatively strong sales, the paid download now looks headed for the music industry’s waste bin.

Just this week, Nielsen Music put some numbers on this meltdown.  During the first half of 2018, sales of song downloads tanked 27.4% to 223.1 million, from 307.2 million during the same period in 2017.  Separately, album downloads slipped 21.7% to 27.5 million units, down from 35.1 million previously.

Albums, of course, include a lot of songs in a bundle.  But the number of bundles is getting dangerously close to zero.

Once upon a time, paid downloads were topping one billion annually.  Now, Drake is crossing one billion streams in a week, part of an insane growth story on platforms like Spotify and Apple Music.

Overall, streams surged to 403.4 billion during the six month period, a jump of 41.6 percent.

That’s an absolute gain of 118.6 billion, a half-year record.  Growth rates were also higher: last year, the first-half streaming gains were 36.5 percent year-over-year.  That makes the latest streaming surge particularly impressive, given that percentage gains tend to subside as baseline volumes increase and formats mature.

Unfortunately, streams generate a lot less revenue pound-for-pound.

An album download is worth gold compared to an album stream.  And the comparison gets even more lopsided when actual, physical album sales are involved.

Separately, sales of physical albums slipped 14.6 percent to 41.3 million units in the U.S.  That downward spiral is happening despite a continued boom in vinyl records, though CD sales drops are no match for vinyl’s resurgence.  During the period, vinyl LP sales grew a handsome 19.2 percent, though overall sales volumes were 7.6 million.

Vinyl records, for all of their gains, remain a niche format.  But that’s another story.

Meanwhile, precipitous drops in download and CD sales are putting a damper on the music industry’s recovery.

The math on this is simple, and Sony Music Entertainment has already said it out loud.  Heavy losses of highly-profitable formats are being counteracted by heavy volumes of low-profit streams.  Of course, volume is good and streaming revenue is solid overall, but the economics here are getting dampened by the loss of some old, high-dollar friends.

The result may be a tempered comeback, though one veteran executives are welcoming nonetheless.

But how long will the download actually last?

Again: simple math shows this format dwindling towards 0 after just a few years.  30% year-over-year drops simply aren’t sustainable (to say the least).  But a rumored pullout by Apple could render this format completely extinct in a shorter period of time.

Earlier, sources pointed to plans by Apple to shut down its iTunes music download store, with warnings issued as early as April of 2019.  Given Apple’s longtime dominance in song and album downloads, the result would be an even more precipitous decline for downloads.

That’s the story on downloads.  But artists and labels in certain genres may want to hold out.

Rap is now dominating streaming, and younger fans are ditching the download entirely.  But it turns out that genres like classical, jazz, children’s, Christian, and even rock are trending higher in both downloads and physical sales.

That suggests that a pullout may be premature for those specialized in those genres.

(click to enlarge)

Then, there are other treats that fans of particular genres enjoy.  For example, vinyl tends of over-index among rock fans, while classical and jazz fans also enjoy the wax (they also tend to have more money).  And for the right artist, enough LP sales can generate a lot of revenue — and even help to sustain a career.

 


 

 

8 Responses

  1. Remi Swierczek

    UMG induced music industry suicide on D. Ek DOPE!
    Global limit of all inclusive streaming and You Tube style ads is at $30B if we are lucky and all nuts work hard by 2030!
    I a love streaming as a method of delivery but there is no reason to give away the house and family jewels if you are not at the GUN POINT!
    Play the best and charge for additions to personal playlists – time to shot down Shazam, Soundhound and Google music PIMPS and start $300B music harvest profitable to all but ….YouTube! Unless you tube wants to become the executor of logical for musicians and music business reality.

    Reply
  2. Nicky Knight

    Gosh, things do seem somewhat grim for the non top chart dweller..

    Downloads produced some very valuable revenues for labels / artists / producers etc..

    Streaming requires such mammoth numbers in order to deliver any steady income.

    Reply
  3. Please show sources

    Hi,

    Do you have the source for the graphic used showing the share of downloads, physical, streaming etc ?

    Reply
  4. Will

    No surprise here. The labels gave up on high margin sales years ago, leaving a declining, but meaningful aging demographic to twist in the wind.

    Not to mention the super fans who are deinsentivised to purchase music.

    Everyone, the musicians, the labels and even the fans lose out. The fans? Yes, even fans lose out, because there is a subjective, but palpable difference in owning the music and contributing to those who make it.

    Some will scoff and say nonsense, but others will know exactly what I’m talking about.

    Reply
  5. Will Buckley

    July 11, 2018
    No surprise here. The labels gave up on high margin sales years ago, leaving a declining, but meaningful aging demographic to twist in the wind.

    Not to mention the super fans who are deinsentivised to purchase music.

    Everyone, the musicians, the labels and even the fans lose out. The fans? Yes, even fans lose out, because there is a subjective, but palpable difference in owning the music and contributing to those who make it.

    Reply
  6. Casey

    I said this years ago and I will say it again. As long as digital music downloads remain profitable, then there is no reason for them to ever go away. Downloads are not a physical format that requires significant scale to keep the ecosystem afloat. The market for downloads may continue to decrease, but it will eventually stabilize. Apple may discontinue the service and they may not. It is unlikely that discontinuing downloads will drive a massive influx in Apple Music subscribers at this point in the game, so they have no real incentive to kill it off as long as it continues to turn a profit which it almost certainly will for the foreseeable future. There are other players in the field too like 7Digital, which seems to be holding their own thanks to the rise in interest for hi-res audio.

    It is highly unlikely music downloads will ever go extinct.

    Reply

Leave a Reply

Your email address will not be published.