Album Sales Down—But That’s Only Part of the Story
The end of June marked the halfway point of the year and always provides an easy mile marker at which to stop and assess the state of the music industry. The emergence of digital music and the ongoing P2P skirmishes have the media watching album sales more the usual. As usual, all eyes are on the album sales.
USA Today’s Edna Gunderson had an
article last week that brought the bad news to the great masses of hotel patrons and airport shoppers. The tally: Album sales are down about 7% compared to last year. 50 Cent’s The Massacre has sold just over four million copies this year—well more than the second best selling title, Mariah Carey’s The Emancipation of Mimi and almost double the amount of the third, The Game’s Documentary . Last year five albums had sold over two million albums by the midpoint. This year three albums have surpassed that number.
Album sales are the standard barometer of the health of the music industry. The Billboard Top 200 album chart has for years been the de facto method of measuring artists’ successes and failures. Times have changed, though, and it’s high time that the music industry’s other revenues be taken into account. Digital music has forever changed the way people buy and listen to music. It’s time to look past the album chart and album sales.
The album, which is to music what the touchdown is to football, is the main figure in music but it’s not as dominant as it once was. (Many say the album is already a dead format. That’s premature, but there’s no doubt that sales are down and will stay down.) Just like there are multiple ways to score points in football, here are other ways to make money in music. In football, a touchdown is six points. The extra point is a single point—sometimes two. A team can score three points on a field goal and two on a safety. So even though a touchdown is usually thought of as the way to score points, there are other ways to get on the scoreboard.
The music industry has three other main ways to make money, and they’re all being overlooked when assessing the state of the music industry: Digital downloads, ringtones, and music DVDs. They’re all growth segments that labels hope will overcome the album sales slump. First is the digital download. The USA Today article says that 158.8 million digital downloads have been sold in 2005. If roughly half are single downloads, and if the current pace is kept through the end of the year, about 160 million single downloads will be sold. That’s roughly (very roughly) $104 million that will go to the labels, and that’s revenue that didn’t exist a few years ago.
Ringtones are another growing source of revenue that didn’t exist a few years ago. The U.S. ringtone market was $300 million in 2004. Labels split the revenues with cellular carriers pretty much down the middle. That’s roughly $150 million in ringtone revenues. Last month a CNET
article on labels’ success with ringtones claimed Sony BMG makes as much from ringtones as it does from digital downloads.
Music DVDs are the third piece to the puzzle and another growth segment. Just a few years ago there wasn’t much going on with music DVDs. Now retailers are clued in to their customers’ love of the DVD and are giving the format more shelf space and greater prominence. Labels have accordingly stepped it up to capitalize on the shift. In 2004, according to RIAA statistics, shipments of music DVD totaled 29 million units. That’s not much, but it was a 66% increase from 2003. In 1999, the industry’s last banner year, shipments were only 2.5 million. That’s a huge increase over five years.
There’s obviously a lot of money and a lot of promise in the margins of music retail. There are three main growth markets and with cellular companies eager to launch music stores there will be a fourth new revenue stream to eat into the album’s market share. Album sales are down about 20 million units so far this year. You know what? Downloads, ringtones, and DVDs can make up that difference. Look at the numbers. There’s a lot of sales that journalists and industry watchers are missing. There’s more to the health of the music industry than just album sales.