The truth about digital sales

Last week, several articles came out decrying a flattening of digital track sales as a sign of an ever worsening music business. Indeed, you can’t argue the overall numbers which don’t look healthy. But on the flip side, the skeptic in me is certainly dubious of such immediate doom and gloom. And an in depth look at the numbers has proven me right. Certain sectors are in trouble but the digital business remains healthy.

Indeed, Soundscan is reporting a 1% drop in track sales for Q1 2010 over 2009. The likely culprit, as reported, is the adoption of variable pricing bringing the impulse purchase down. In the face of a price hurdle, one could view the decline as a slowdown rather than a trend towards doomsday.

And this is where the bright spot has failed to be reported. Even though album sales overall have declined by 8%, digital album sales have increased by 16% year over year. It’s obvious that digitally, sales may actually be shifting from singles to albums, a feat everyone should be cheering.

This also begs the question as to why this shift has occurred. Two reasons can be found. The first is back to pricing. Simultaneous to singles increasing to $1.29, many albums are now often on sale for either $7.99 or $5 as part of Amazon’s monthly program. This means albums have shifted from a 10x cost to the price of a single to a 4x to 6x cost. Albums are now a perceived better value so consumers spend more. Smart moves by all.

As important, if not more important, is what I’ve been saying in everything from Chapter 7 in my book to my recent post on Justin Bieber:

RELEASE MORE SONGS MORE OFTEN

The Billboard article seems to acknowledge this, but in a throwaway line in the 7th paragraph by saying the first quarter’s robust release schedule is an “unusual occurrence”. But the point should be that it shouldn’t be out of the ordinary. In order to achieve sales, there needs to be more titles both by new acts as well as other acts releasing more music. In fact, of the Top 30 selling digital albums, the percentage of new releases from Q1 ’09 to Q1 ’10 increased from nearly 1/3 to nearly 1/2. It’s clear that getting more music in the market place nets bigger sales.

Meanwhile, on the track side, the Top 50 sellers for Q1 ’10 are dominated by repeat entrants such as Black Eyed Peas and Lady Gaga (4 tracks each), Ke$ha (3 tracks each) and Taylor Swift, Miley Cyrus, Jason Derulo and Jay Sean (with 2 tracks each). The fact that these artists are either currently releasing lots of tracks or have released many singles in the past year obviously pays off in dividends. Many other acts who are not selling as strongly are, in many cases, taking much longer periods in between single releases.

But of the Top 50 tracks sellers, note that the most notable artist WITHOUT multiple titles in the Top 50 sellers is the aforementioned Justin Bieber. There, the focus as noted has been on affordable albums released often and that has truly paid off. This is especially notable since the fanbase, tween girls, presumably would be most apt to consume via singles, streams or stealing. Instead, they are purchasing more music via album. By making it affordable, Island Def Jam is clearly getting more dollars per consumer and siphoning off dollars that would likely have otherwise been spent on singles.

Indeed, in the Top 50 digital album sales category, three artists have 2 titles each: Justin Bieber, Lady Gaga and the Glee cast. Each of which has clearly utilized multiple releases to huge success. In fact, the Glee Cast are about ready to add a 3rd album in 6 months to that list.

It’s a shame that music press wishes to focus on overall negativity rather than encourage the many bright spots in music sales. A 16% increase in digital album sales should be championed as a solid sign that there CAN be light at the end of the tunnel, if we only focus on the path to get there. Futurehit.DNA readers are already adopting this philosophy along with many techniques outlined in the book and are gaining that market share from artists who are still following last decade’s playbook.

Bottom line for Futurehit.DNA watchers: Make your album a value over the price of a single, release more of them in shorter time frames, and watch as you generate more fans and revenue. At any level, this is a key driver for future music success.

3 Responses to “The truth about digital sales”

  1. Paul Petrick April 15, 2010 at 2:50 pm # Reply

    The doom and gloom reporting on the drop in track sales drives me nuts. If you raise the price of good (say from $.99 to $1.29), the quantity demanded will decrease. Price elasticity is just basic economics. And yet none of the reporting asked the most obvious question: Did the price increase make up for the decrease in units sold. I did some quick calculations on a guest blog post (http://www.theredbeardedhipster.com/2010/04/listen-like-thieves-non-news-is-good.html) that suggests overall sales in dollars actually increased. Far from doom and gloom.

    • admin April 15, 2010 at 6:18 pm # Reply

      Absolutely right that absolute digital dollars are up. Especially when profit margins on $1.29 singles are higher because mechanicals are fixed.

  2. Jeff Dolan April 15, 2010 at 6:08 pm # Reply

    Thanks so much for sharing solid data. It’s rare and appreciated because you can cut through the clutter with it.

    This model really lends itself to the indie because finding a sustainable release cycle of a single at a time is easier than an album at a time.

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