Album sales plunge, digital downloads up

NASHVILLE, Jan 2 — Music sales have continued to slump in 2008 as the increased number of downloads of digital tracks failed to make up for a plunge in the sale of compact discs.

Year-end sales figures released on Wednesday by The Nielsen Co show total album sales, including album equivalents made up of single digital tracks, fell to 428.4 million units, down 8.5 per cent from 500.5 million in 2007.

Physical album sales fell 20 per cent to 362.6 million from 450.5 million, while digital album sales rose 32 per cent to a record 65.8 million units.

Digital track sales, such as those conducted in Apple Inc’s iTunes Music Store, were up 27 per cent from last year, breaking the 1 billion mark for the first time at 1.07 billion.

The report continues a troubling trend for the recording industry, which has a harder time maintaining profits when consumers buy single songs instead of albums. The number of transactions rose 10.5 per cent to 1.5 billion, although the figure treats single track and whole album purchases the same.

“You can see the overall unit sales as a positive, but their model is really built on album sales and that just continues to decline,” said Silvio Pietroluongo, director of charts for Billboard magazine.

“Music consumption has never been at a higher clip, it’s just a matter of trying to turn it into revenue,” he added.

Some record labels are making progress. Craig Kallman, chief executive of Warner Music Group Corp’s Atlantic Records, whose artists include Kid Rock and T.I., said his label passed a milestone in the year to September by having its digital revenue exceed that from physical CD sales.

The label, the top-selling in the US in 2008, has had to become more careful in choosing which artists to promote and more patient in waiting for their songs to break out, he said.

“You have to really be right about your hits. If you’re going to invest that amount of time in them and not run as many records, you have to be way more right today than wrong,” Kallman said.

Nielsen SoundScan said album sales fell in every genre. Classical music saw the biggest drop at 26 per cent, followed by country at 24 per cent and Latin at 21.1 per cent.

Taylor Swift was the year’s best-selling artist with more than 4 million albums sold, followed by AC/DC, Lil Wayne and Coldplay. Sugarland finished No 8.

Swift had two albums on Nielsen’s Top 10 sales list: her self-titled debut at No 6 and her sophomore album “Fearless” at No 3.

“Taylor Swift is a great artist development story that started as organically as you can in the digital age,” said Scott Borchetta, president and CEO of her label, Big Machine Records. “It involved online, non-stop radio tours and strategic TV opportunities which led to non-stop touring. But — most importantly — Taylor connected with her fans like no other artist in 2008”.

Lil Wayne had the year’s top-selling album, “The Carter III”, with 2.87 million units sold, with Coldplay’s “Viva La Vida” (2.14 million) and Swift’s “Fearless” (2.11 million) rounding out the top three.

The top selling digital artist was Rihanna with 9.94 million tracks sold, followed by Swift and Kayne West.

Ironically, as digital downloads grew, vinyl album sales also climbed. In 2008, more vinyl albums were purchased (1.88 million) than any other year since Nielsen SoundScan began tracking sales in 1991.

More than two of every three vinyl albums were purchased at an independent music store during the year, the company reported. The top selling vinyl albums were Radiohead’s “In Rainbows” (26,000 units), the Beatles’ “Abbey Road” (16,500) and Guns ‘N Roses’ “Chinese Democracy” (13,600).

Nielsen also reported that music sales exceeded 65 million in the final week of 2008, representing the biggest sales week in the history of Nielsen SoundScan. The previous record was Christmas week of 2007 with 58.4 million music purchases. — AP

The Long Fail: the cost of digital distribution

Digital distribution as well as promotion has undoubtedly been the best thing that could have happened to music fans as well as musicians. Even bigger content owners are finally seeing the opportunities (instead of the threats) that come with the technical change of delivering 'media' over the last ten years. It is now easier than ever for artists to connect to their fans and delivering the music to them, gatekeepers have been eliminated and (in theory) artists can reach out to millions of music fans out there through the internet. So far, so good.

Everyone who works in music knows that there are various new challenges that have developed through new digital delivery methods and those challenges can make it difficult to monetize digital music. I won't be going into the issue of file sharing (there are enough people out there who have something to say about that) but I want to explore a common misunderstanding about digital media: "digital distribution is free" (or at least very cheap). It is not at the moment.

Chris Anderson's 'The Long Tail' discusses how we can monetize niche genres through very cheap distribution and how one can successfully make a business outside of the 'blockbusters' through scalable distribution methods as well as recommendations, which are enabled through digital technology. For the music industry this means that it should be easier for artists (or labels) outside the Top 100 to find their audience and sell products (downloads, CD, tickets, etc) to them by using those new technologies. This sounds all great on paper until you look at the actual cost of digital distribution. It is actually quite high.

Lets look at a simple example. I'm an artist and I want my album to be available through various download shops. My music has a niche audience but with my distinct sound and existing online following I should be able sell more music by having my album available at more retailers. If I want to do all the work myself I will have to go through the following steps:

• Identify online retailers I want my album to be available at. And there are plenty all over the world.
• Negotiate deals with those retailers.
• Deliver my album in the correct specification. Those will vary from retailer to retailer.
• Make sure I receive regular royalty reports.
• Check those and send invoices. This will have to be repeated every month or quarter, depending on the reporting period of the retailer, and of course it has to be done for each retailer.
• There might be some additional unexpected tasks when things go wrong: wrong meta data displayed, you never receive reports from certain retailers, some retailers might not perform well and I would like to withdraw my content, etc.

If I add up all the time I invest in the above and associate a cost to that I will quickly find out that the distribution of my album was not cheap after all. Yes, I didn't have to manufacture any CDs and there are no actual shipping costs but this does not mean it's practically free to make sure my album is available to download.

Where does this leave us? All the above makes be think of two things: a) the above doesn't always have to be like this and b) companies that control a lot of content (labels and digital aggregators) are important in the digital music ecosystem for now.

We have to make sure that digital delivery methods as well as reporting formats are standardized. Those currently create a huge workload for content owners as well as DSPs. Deals to get your music on the different platforms can also be difficult to negotiate and standard rates would make this easier for everyone. I could also go into the topic of blanket licensing for all digital music usage but this is probably something for another blog post.

In short: systems and processes will have to be built to really bring down the cost of digital distribution. Some companies already have great internal systems but we will have to work on open standards and make sure all the systems can talk to each other. The more we take out human interaction the cheaper this can become.

I give you one example of a company that has managed to build systems like the above: On Tunecore you can get your music on various retailers by paying a small flat fee. They built the infrastructure to deliver music to iTunes and get reports back without having to add much human interaction. However they cannot deliver to all DSPs but only a selection of digital download shops as well as streaming services.

There are plenty of other companies out there who are working on similar technology and it will be good to see more development in that field. If you are musician or a label today: make sure you find someone to distribute your content for you if you want your music to be available in a range of places.