As 2013 starts to get under way, musicians and labels are starting to look back on 2012 to see how they faired. While the final numbers aren’t in yet, it appears that the music industry as a whole took a slight drop in album sales across digital and physical platforms. Preliminary Nielsen Soundscan data is showing a 4% drop in album sales, even with a 6% increase in digital downloads. This data can either be construed as good news or bad news depending on who you are and how you interpret it. Let’s start with the good news.
The good news is that the music industry is still here! It seems like every year the RIAA and the major labels are warning us that the music industry as we know it will be forced to shut down completely due to piracy and copyright infringement but so far that hasn’t been the case. As a matter of fact, total music purchases are at an all-time high, selling over 1.65 billion units in 2012 (a 3.1% increase from 2011.) This could be in part due to changing revenue streams and models, as evidenced by the increase in digital downloads. It’s important to note that Soundscan data doesn’t account for revenue from streaming, radio, or subscription based platforms such as Pandora, Spotify, YouTube, Rhapsody, etc. On that note, let’s look at the bad news.
While music sales are at an all-time high, streaming and subscription based services are on the rise as well. Spotify topped 5 million paid subscribers in 2012 while cancelling their paid download service that they unveiled in Europe in 2009, though it never quite made it over to the U.S. This is troubling for artists and labels because paid downloads returned more money to them. Similarly, Pandora posted a record number of listener hours and increases in revenue from the year before. The bad news is that both of these services pay fractions of a penny per stream. As a matter of fact, it would take 140 plays on Spotify and 700 plays on Pandora to be equivalent to the royalties paid from one download.
So with no shortage of eager listeners and customers, the labels and distributors must find a way to start fairly compensating artists once and for all. Album sales may drop and revenue models may change but without the artist, the music industry will really self destruct. Let’s hope that 2013 will bring great new content to consumers by using new technology while the new technology and distribution platforms find a way to stay afloat while playing fair.
Looking Forward in 2013,
Kelli Richards
CEO of The All Access Group LLC
0 thoughts on “2012 Music Revenue: Time to Update Our Model”
Digital music sales, meanwhile, climbed 8.0 percent to $5.23 billion, according to the IFPI. Within the United States, the total digital music revenue rose 17.3 percent to $2.62 billion, the RIAA said.
Licensing fees don’t make up for the volume of total lost sales, but Gandhi says the fact that the music industry is finally embracing these new technologies and revenue streams means the industry is finally getting it.
Total U.S. recorded music spending will therefore end up $134 million higher, a gain of 2.1 percent to about $6.45 billion. “Having stabilized long-term revenue declines resulting from the downsizing of packaged music spending, the industry will be hoping that digital can rebuild the U.S. music market to something approaching its former stature,” Barton said.
While the music business has increased its digital revenues by 1,000 percent from 2004 to 2010, digital music theft has been a major factor behind the overall global market decline of around 31 percent in the same period. And although use of peer-to-peer sites has flattened during recent years, other forms of digital theft are emerging, most notably digital storage lockers used to distribute copyrighted music. Q: How much money does the music industry lose from piracy? There are two categories to consider here: losses from street piracy – the manufacture and sale of counterfeit CDs – and losses from online piracy. One credible analysis by the Institute for Policy Innovation concludes that global music piracy causes $12.5 billion of economic losses every year, 71,060 U.S. jobs lost, a loss of $2.7 billion in workers’ earnings, and a loss of $422 million in tax revenues, $291 million in personal income tax and $131 million in lost corporate income and production taxes. For copies of the report, please visit http://www.ipi.org .As you can imagine, calculating loses for online piracy is a difficult task. We do know that the pirate marketplace currently far dwarfs the legal marketplace, and when that happens, that means investment in new music is compromised.
That’s likely due to the fact that since 2004, all the news about sales has been bad, bad, bad. Consider that the music industry hasn’t seen growth since George W. Bush was preparing for a second term as president, the Boston Red Sox were breaking the curse of the Bambino, and Mark Zuckerberg was founding Facebook.
Despite increasing digital sales, the largest record labels have all reported a considerable decline in overall revenues from sales of recorded music to consumers in the first decade of the 21st century.
Port Washington, NY, March 17, 2009 – According to The NPD Group, the leader in market research for the entertainment industry, the number of Internet users paying for digital music increased by just over 8 million in 2008 to 36 million Internet users. Purchases of online digital music downloads increased by 29 percent since last year; they now account for 33 percent of all music tracks purchased in the U.S. NPD’s Digital Music Study, an annual tracking study covering the music industry, also revealed that there were nearly 17 million fewer CD buyers in 2008 compared to the prior year.
Streaming sales – listening to tunes on the likes of Spotify and Deezer – are set to take over as the leading revenue growth engine for the music industry, the report predicts, as music-lovers increasingly experiment with sampling new artists and listening to back catalogues online.
Not all CD sales were lost to the Internet. The report notes that the total number of music buyers was down as consumers kept a close eye on their wallets, a symptom of the down economy.
Streaming sales – listening to tunes on the likes of Spotify and Deezer – are set to take over as the leading revenue growth engine for the music industry, the report predicts, as music-lovers increasingly experiment with sampling new artists and listening to back catalogues online.
A diversified revenue base and strong growth in a la carte albums sales and paid subscriptions meant digital music represented the majority of record industry revenues for the first time during Q1, 2012, new figures revealed today by the BPI confirmed.