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3.31.2006 

Digital Sales - the Scooby-Doo Band-Aid covering your gaping wound

Macworld UK runs an article with a deceptively cheery headline today: "iTunes almost saves the music industry." It's based on IFPI numbers released today, showing that there's a big surge in digital sales. Yet the second sentence is where it's at. As Jonny Evans notes, "the value of the overall market continues to decline." This comes on the same day that the RIAA released its year-end numbers for 2005 that showed essentially the same thing: a huge increase in digital sales, and a massive decline in the music industry's overall sales. (I received a press release from the RIAA with the year-end chart. Those numbers are not online yet, but as soon as they are I'll put up a link.)

The problem for the music industry is this: the kids are all done with albums. They want singles. I had an interesting conversation with Eric Garland of Big Champagne for an upcoming article. He told me that even when the albums are "free" (that is to say, available on a P2P network) and even when you look at album-oriented music such as Green Day's American Idiot, people still only download an average of four songs per album1.

So let's say you convert consumers to legitimate downloads--iTunes or Napster or what have you. And let's, just to make it easier, throw in two extra songs, you've you've got six songs purchased per album. Now you're talking about a six dollar sale. Yet previously, in the CD and LP-era, that same customer would have been a sixteen dollar sale. Yeah, that's five more units, but in terms of annual sales that's ten bucks less. Hell, let's say that everyone's buying albums--which they certainly are not. The music industry is still out six bucks. This indicates to me that you need a new model.

Albums haven't always been the record industry's bread and butter. It used to live and die on the single. And it seems that it might need to go back to that in order to succeed.

I think we'll soon see more and more artists going the Death Cab for Cutie route. Death Cab sells lots of iTunes Exclusives--singles, live versions, interviews and most recently an entire video album. The videos have generated huge buzz. Longer term, I think we're going to see the album become increasingly supplanted by singles, videos, and live tracks.

I'm not saying albums are dead. Yet. But it seems like the music industry has to find a way to cut costs and meet demand. And if demand is for singles, that's what will be supplied.

As Apple has rightly pointed out, subscription models suck because people want to own their music. It says something about who we are. When we listen to an old song that we haven't heard in years, it can take us back to a place in time. But that doesn't mean Apple's 99-cent per track model is here to stay.

A true subscription plan makes a lot of sense. Instead of paying per song, you pay a fee per time period entitling you to X number of downloads over said period. Think of eMusic. Customers subscribe for a monthly fee, but they still get to own their music. (And the beauty of it for Apple and the recording industry is, of course, like Netflix or cell phone plans, not everyone actually downloads everything they pay for.)

The other, less appealing option, is what we might be more likely to see: record companies refusing to license music to the iTunes Music Store unless Apple raises the price to some exorbitant sum. Let's hope not. For if the music industry want consumers to start nailing down the coffin lid, $2 downloads would make nice hammers.



1. And this is probably a generational thing. Younger listeners have different habits. The RIAA gave a little shout out to the kids. From today's release:
However, the piracy problem on college campuses is evolving and presenting new challenges. Internal campus song distribution networks, the piracy of songs or albums before commercial release dates, and the pirating of artists’ entire catalogue in a single keystroke on certain sites, are all becoming increasingly popular.

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