Three Reasons Why Digital Music Sales are Slipping (...if, in fact, that's what's happening)
By Rick Moss
As reported by the Union-Tribune of San Diego, the first whiff of a slowdown in the growth of digital music sales may be in the air. Reports from both the Diffusion Group of Plano, Texas and New York-based Pali Research indicate a first quarter growth trend that is declining slightly vs. the same period last year.
In the first 16 weeks of 2006, the average volume of U.S. downloads more than doubled vs. the same period in 2005, however instead of trending upward through the period as it did last year, it ramped down by nearly 2 million downloads during the quarter.
Marc Freedman of Diffusion characterizes the trend reversal as the end of the "hyper-growth period," while Nielsen SoundScan analyst Anna Loynes prefers the industry write it off as a "seasonal fluctuation."
While digital eCommerce supporters will point out that annual sales of iPods and other portable players are expected to take another 40 percent leap in 2006, the space occupied by legitimately paid-for songs on such devices is tiny compared with that of tunes ripped from CDs or copied illegally in one way or another. So, it's hard to draw a direct corollary between the two trends.
Although there's almost certainly not yet enough history to demonstrate a bona fide trend, there are plenty of industry watchers ready to announce that paid downloads are about to plateau. And they're ready with the reasons why. Prominent theories include:
#1: A la carte downloading "is not a compelling experience for consumers." That quote comes from Dana Harris, spokesperson for Napster. Granted, Napster is a company busily promoting its $9.95/month unlimited subscription service, but most people do feel in their gut that the act of paying for each tune individually will only be charming for so long.
#2: The "I've pretty much bought all the basic stuff I need," theory, as expressed by consumer Jim Hervey who paid for about 100 songs last year and only about 10 this year, now that he's got his Southern Rock canon iPodded.
#3: "People are cheap and will keep cheating and stealing until they get caught and publicly humiliated." OK, I made that one up. But let's come clean: at the moment, it's still slightly easier and far, far cheaper to use peer-to-peer copying vs. paying for downloads, and there is simply not a tangible enough threat of getting nabbed for it to be a deterrent. The elephant in the room...the music industry is only going to take paid downloading so far when people have more motivation to find creative ways to steal than to play it straight.
Moderator's Comment: At this juncture, with the digital download boom losing momentum and moving into a more mature phase, has the music industry learned anything about serving the customer?
With all the amazing, empowering technology now in the hands of music producers and listeners, so many possibilities exist for the future of commercial music that the head reels. And yet, here we are still trying to sell a digital version of the 45s we used to buy at Korvettes.
It's been suggested to Apple (that's the Beatles, not Steve Jobs) that they should release some of the band's isolated studio music tracks for free download on the internet and let fans remix them to whatever creative ends they desire. Can you imagine the excitement that would cause? ("You say you want a revolution!?") It sounds anti-commercial, but that's the kind of kick in the butt the industry needs. This model is broken; let the music lovers decide where it should go and they'll lead you to the money. - Rick Moss - Moderator