Music Business Reality Today

The Music Industry Landscape Today

 Let's first look at the recent numbers to come out (in chronological order)...

December 11th 2006:

TheRegister published headline findings from market analyst, Forrester Research, that had looked at credit card transactions and (loosely) concluded that iTune sales had seemingly reached their peak in January... of last year!! (Apple iTunes doesn't publish sales figures, hence credit card transactions - there's just no privacy these days!)

While the iTunes service saw healthy growth for much of the period, since January [2006] the monthly revenue has fallen by 65 per cent, with the average transaction size falling 17 per cent. The previous spring's rebound wasn't repeated this year.

... "There's a problem here. CD sales have fallen 20 per cent over five years. The message here is not that CD sales are coming back, the ability to obtain pirated music is now so widespread the DRM looks to consumers more like a problem than a benefit."

Full article at TheRegister: iTunes sales 'collapsing'

That was just before Christmas - typically a time when sales start to spike.

Jan 5th 2007:

News.com (Australia) said in their report, US album sales suffer in 2006

While data from the music tracking company [Nielsen SoundScan] showed overall music unit sales rose 19.4 per cent last year due to digital downloads, the growth momentum of that category also disappointed some market watchers.

"Not only did year-end 2006 digital sales fall short of our expectations, more concerning is the deceleration in growth during the fourth quarter," Richard Greenfield, an analyst with Pali Research, wrote in a research note.

"We are increasingly concerned that digital track sales will struggle to show 40 per cent growth in 2007," he added.

So, against a backdrop of growing sales of digital music, the growth (for last year) was far short of earlier expectations which Greenfield had predicted would be around 129% for the 4th quarter of 2006... instead, it was just 57%! Plus, he is predicting an even lower 40% growth for the whole of 2007!

Of course, you could just say that Greenfield was talking out of his arse when he predicted such wild growth (back in late 2005), but good analysts don't make a fat wedge by just blindly plucking numbers from nowhere - he has a decent forecasting record as you can see at Yahoo's Analyst Performance Center (if you're aroused by such reports).

Something has gone quite spectacularly awry!

Today (Jan 11th 2007):

HMV - a major UK high-street retailer of music - reported a £36.4m loss for the last 6 months. That figure also includes the xmas period, for which, like-for-like sales declined (as compared to xmas period 2005).

(From the BBC)

HMV has been hit by a collapse in singles sales due to the huge increase in the number of people downloading music.

The article goes on to say...

It [HMV] revealed on Tuesday that it was dropping the official UK singles chart from its stores after more than 40 years, saying it was no longer relevant to the way it sold music.

WOW! Remember, HMV is a major high-street music retailer, and as such, a prime outlet targetted by record industry marketing departments eager to push new talent into the public conscience. The fortunes of many aspiring artists live and die on the weekly sales figures produced by the likes of HMV!

HMV is apparently replacing the UK singles chart with its own, so sales aren't exactly going to grind to a halt. Nevertheless, it is seemingly no longer going to be a contributing part to the national charts which does, IMO, constitute a major re-shaping of the landscape if it means that an artist now only has to sell 25 singles to top the national charts (an exageration in number perhaps, but we can agree, it will be a lot lower)!

The industry is fragmenting. The crossroads are near. You're caught in the crossfire, helpless as a Deer.
(Just frickin made that up, RARR!!)

Signing that three album deal now may well prove to be artistic suicide in this shifting landscape. Be careful!