2012 Music Revenue: Time to Update Our Model
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
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