Year in Review: Digital Sales

Reports consistently indicate an increase in the level of music sales in the digital format. There has also been further speculation as to the introduction of variable pricing as well as some experimentation with new digital formats.[1]

Sales
Digital sales in 2007 as reported by RIAA now account for 23% of US based recording revenues.[2] There was an increase of 38.1% for paid downloads to 809.9 million units ($US801.8 million).[3] Digital albums were up 54% with 42.5 million units sold ($US424.9 million).[4] Mobile formats including downloads and ringtones increased to 361 million units, up 14.6%.[5]

However, overall sales in the United States over the 12 month period between January and December 2007 dropped 16.1%.[6] The increase in digital sales this has not been enough to make up for the continued decline in CD sales.[7]

During the first quarter of 2008 digital sales increased 28.7% to 281.4 million units.[8] In the first half of 2008 sales of digital albums in the United States continued to increase, rising 34% to 31.6 million units accounting for 15.5% of overall album sales.[9] Digital singles increased 30% to 524.7 million units from 399 million units.[10]

Globally digital revenue rose from $800 million to $2.9 billion in 2007, from 11% to 15% of total music revenue.[11] However the IFPI suggest that illegal downloads still out number legitimate sales 20:1.[12] It took iTunes 5 years to sell 5 billion tracks while it is estimated that 1 billion tracks are traded for free on file sharing networks per month.[13]

Sales statistics for each of the main digital music services are more difficult to find. In April 2008 USA Today published rankings of all the digital music stores.[14] It stated that iTunes was the most popular digital music store in the United States with estimated annual revenue of $1.8 billion with Napster ranked second at $125 million and eMusic ranked third at $42 million.[15] Rhapsody challenged this ranking reporting 2007 revenue of $149.1 million arguing that it should be ranked in second place behind iTunes and ahead of Napster and eMusic.[16]

On a label by label basis it is also difficult to find comprehensive data. SonyBMG has been reported as suggesting that 30% of its business is now in the digital format.[17] Warner estimates its digital revenue to be around 15.7% of overall sales.[18]

Variable Pricing
Wal-Mart has begun introducing lower prices for selected digital sales.[19] While this music service had already introduced some tracks being sold for $0.88 cents each, in October it was announced that some songs would be sold on a promotional basis for $0.74 cents each.[20] Most tracks remain priced at $0.94 cents each.[21]

Warner announced in May 2008 that it was considering a trial of liquid variable pricing through the use of technology developed by Digonex.[22] The technology gauges the popularity of tracks and can be used to spur up sales through temporary discounts.[23]

Formats
In September 2008 it was reported that ScanDisk were introducing Slot Music sales to selected retail department stores in the United States.[24] MicroSD cards with 1 gig capacity are being trialled for 29 artists. Each card will be sold for $15.00 each and contain songs and other multimedia material such as liner notes, album art and videos.[25] There will be no use of Digital Rights Management technology.[26] They are designed for use in new models of mobile phones but are also being packaged with USB compatibility to allow for use on PCs, Mac and Linux machines.[27]


[1] Digital Music News, July Already? Album Sales Keep Sinking In '08... (3 July 2008) <http://www.digitalmusicnews.com/stories/070208album> at 4 July 2008
[2] RIAA, 2007 End Year Shipment Statistics (April 2008) <http://76.74.24.142/81128FFD-028F-282E-1CE5-FDBF16A46388.pdf> at 30 April 2008; Digital Music News, Digital Hits 23 Percent of US-Based Revenues, RIAA (28 April 2008) <http://www.digitalmusicnews.com/stories/042708riaa> at 30 April 2008
[3] RIAA, 2007 End Year Shipment Statistics (April 2008) <http://76.74.24.142/81128FFD-028F-282E-1CE5-FDBF16A46388.pdf> at 30 April 2008; Digital Music News, Digital Hits 23 Percent of US-Based Revenues, RIAA (28 April 2008) <http://www.digitalmusicnews.com/stories/042708riaa> at 30 April 2008
[4] RIAA, 2007 End Year Shipment Statistics (April 2008) <http://76.74.24.142/81128FFD-028F-282E-1CE5-FDBF16A46388.pdf> at 30 April 2008
[5] RIAA, 2007 End Year Shipment Statistics (April 2008) <http://76.74.24.142/81128FFD-028F-282E-1CE5-FDBF16A46388.pdf> at 30 April 2008; Digital Music News, Digital Hits 23 Percent of US-Based Revenues, RIAA (28 April 2008) <http://www.digitalmusicnews.com/stories/042708riaa> at 30 April 2008
[6] RIAA, 2007 End Year Shipment Statistics (April 2008) <http://76.74.24.142/81128FFD-028F-282E-1CE5-FDBF16A46388.pdf> at 30 April 2008; Digital Music News, Albums Keep Dropping; Bottom Remains Murky (11 April 2008) <http://www.digitalmusicnews.com/stories/041008sales> at 13 April 2008
[7] Digital Music News, PwC: Australian Recordings Going Down Under (6 August 2008) <http://www.digitalmusicnews.com/stories/080508pwc> at 7 August 2008
[8] Digital Music News, Album Sales Bath Continues During First Quarter (3 April 2008) <http://www.digitalmusicnews.com/stories/040208quarter> at 8 April 2008
[9] Digital Music News, July Already? Album Sales Keep Sinking In '08... (3 July 2008) <http://www.digitalmusicnews.com/stories/070208album> at 4 July 2008
[10] Digital Music News, July Already? Album Sales Keep Sinking In '08... (3 July 2008) <http://www.digitalmusicnews.com/stories/070208album> at 4 July 2008
[11] Slyck, P2P Downloads Crush iTunes/Digital Sales 20:1 (24 January 2008) <http://www.slyck.com/story1642_P2P_Downloads_Crush_iTunesDigital_Sales_201> at 31 January 2008; Other reports suggest that globally music accounts for an estimated 18% of total revenue: ArsTechnica, Fragmented European market hurting digital music sales (28 February 2008) <http://arstechnica.com/news.ars/post/20080228-fragmented-european-market-hurting-digital-music-sales.html> at 3 March 2008
[12] The Age, 95% of music doanloads are illegal (25 January 2008) <http://www.theage.com.au/news/web/95-of-music-downloads-are-illegal/2008/01/24/1201025084723.html> at 31 January 2008
[13] Slyck, P2P Downloads Crush iTunes/Digital Sales 20:1 (24 January 2008) <http://www.slyck.com/story1642_P2P_Downloads_Crush_iTunesDigital_Sales_201> at 31 January 2008
[14] Digital Music News, Who's Number Two? Three? Researcher Starts Counting Benjamins... (1 April 2008) <http://www.digitalmusicnews.com/stories/033108number> at 2 April 2008
[15] Digital Music News, Who's Number Two? Three? Researcher Starts Counting Benjamins... (1 April 2008) <http://www.digitalmusicnews.com/stories/033108number> at 2 April 2008
[16] Digital Music News, Rhapsody Challenges Recent Researcher Ranking (2 April 2008) <http://www.digitalmusicnews.com/stories/040108rhapsody> at 3 April 2008
[17] ArsTechnica, Fragmented European market hurting digital music sales (28 February 2008) <http://arstechnica.com/news.ars/post/20080228-fragmented-european-market-hurting-digital-music-sales.html> at 3 March 2008
[18] Digital Music News, Digital Percentages Accelerating Rapidly at Majors (28 February 2008) <http://www.digitalmusicnews.com/stories/022708percentages> at 29 February 2008
[19] Digital Music News, Wal-Mart Introduces... The 74-Cent Download (29 October 2008) <http://www.digitalmusicnews.com/stories/102808walmart> at 30 October 2008
[20] Digital Music News, Wal-Mart Introduces... The 74-Cent Download (29 October 2008) <http://www.digitalmusicnews.com/stories/102808walmart> at 30 October 2008
[21] Digital Music News, Wal-Mart Introduces... The 74-Cent Download (29 October 2008) <http://www.digitalmusicnews.com/stories/102808walmart> at 30 October 2008
[22] Digital Music News, Warner Music Group Pilots True Variable Pricing (6 May 2008) <http://www.digitalmusicnews.com/stories/050508warner> at 7 May 2008; THR.Com, Warner music Group to try dynamic pricing (5 May 2008) <http://www.hollywoodreporter.com/hr/content_display/news/e3i33d4223fc20859064e611002f6284804> at 7 May 2008
[23] Digital Music News, Warner Music Group Pilots True Variable Pricing (6 May 2008) <http://www.digitalmusicnews.com/stories/050508warner> at 7 May 2008; THR.Com, Warner music Group to try dynamic pricing (5 May 2008) <http://www.hollywoodreporter.com/hr/content_display/news/e3i33d4223fc20859064e611002f6284804> at 7 May 2008
[24] ZeroPaid, 'Slot Music' - Record Labels to Sell Music On MicroSD Cards (24 September 20080 <http://www.zeropaid.com/news/9771/%27SlotMusic%27+-+Record+Labels+to+Sell+Music+on+MicroSD+Cards> at 26 September 2008; TechDirt, SanDisk Makes Music Even Less Convenient (22 September 2008) <http://www.techdirt.com/articles/20080922/0247072325.shtml> at 26 September 2008; The Wall Street Journal, SanDisk, Record Companies Plan New Music Format (22 September 2008) <http://online.wsj.com/article/SB122204010273861109.html> at 26 September 2008
[25] ZeroPaid, 'Slot Music' - Record Labels to Sell Music On MicroSD Cards (24 September 20080 <http://www.zeropaid.com/news/9771/%27SlotMusic%27+-+Record+Labels+to+Sell+Music+on+MicroSD+Cards> at 26 September 2008; The Wall Street Journal, SanDisk, Record Companies Plan New Music Format (22 September 2008) <http://online.wsj.com/article/SB122204010273861109.html> at 26 September 2008
[26] The Wall Street Journal, SanDisk, Record Companies Plan New Music Format (22 September 2008) <http://online.wsj.com/article/SB122204010273861109.html> at 26 September 2008
[27] ZeroPaid, 'Slot Music' - Record Labels to Sell Music On MicroSD Cards (24 September 20080 <http://www.zeropaid.com/news/9771/%27SlotMusic%27+-+Record+Labels+to+Sell+Music+on+MicroSD+Cards> at 26 September 2008; The Wall Street Journal, SanDisk, Record Companies Plan New Music Format (22 September 2008) <http://online.wsj.com/article/SB122204010273861109.html> at 26 September 2008