The Music Industry's "1-2%" Death Knell

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Tuesday, Apr 22, 2014
Articles hailing "the death of the music industry" are a dime a dozen, but recent stories about album sales, iTunes Radio, and radio audience shares -- when bundled together -- indicate that the big shift everyone has feared is actually genuinely happening.

The United States is at an absolutely terrifying tipping point, and it’s all because of one terrifying number: “1%-2%”.


You see, ever since Napster and the music industry’s best year ever being at the peak of the millennial boy-band boom, physical album sales have gradually declined as digital has slowly inched its way towards becoming the dominant musical format. We’ve seen articles about this time and time again, and it wasn’t too long ago that a video went viral wherein modern children were asked to try and play music on a Walkman, and they were hilariously confused.
  
However, we get a new “the music industry is dead” thinkpiece just about every other month, and the sheer succession of such articles have lead to that morbid chant becoming nothing more than white noise. Even as physical sales have declined, digital tracks and albums have gradually been the savior of major labels the world over, and even with Walmart cutting its CD stock in half, there were those thinking that kids will just buy albums through iTunes or AmazonMP3 or 7Digital or whathaveyou.


However, this is not panning out to be the case.


As recently as 2011, the music industry had an up year, with the year-end totals indicating that albums sales were up a whole three percent compared to 2010. Some argue that the sole reason that happened is because of the runaway across-the-board success of Adele’s 21, but one album does not make a nation suddenly loosen their wallets, and although sales the years following have gradually lost ground on a year-to-year comparison, in 2014, it has it its absolute nadir.


Despite the soundtrack to Frozen selling copies hand-over-fist, on the April 17th, 2014 Billboard chart, album sales are already down an astonishing 17 percent compared to last year, with YTD album sales standing at 70.9 million, way down from the 85.1 millions sold at the same point in 2013. However, previous gaps of this severity were usually offset by the ever-increasing popularity of digital songs, but already, those are significantly down this year, 355.1 million versus last year’s 410.3 million, a gigantic difference of 13 percent. It’s not even May yet, and those numbers are going to fall even more as time moves on.


Thus, the popular notion is that with services like Spotify and Pandora gaining in notoriety, people aren’t as much hoarding or buying media so much as they are just streaming it at work, home, or on their mobile devices. Yet, as some recent articles have highlighted, not even that standard is holding true.


Which leads us back to that terrifying “1%-2%” statistic.


What is that in reference to? It’s actually directly related to iTunes Radio, which, thus far, is being considered a failure by certain contingents. Digital sales are down across the iTunes store (which is leading to a rather drastic redesign, its first in over a decade), but as a recent Billboard article highlighted, iTunes has indicated that only 1%-2% of listeners of iTunes Radio ever actively click the “Buy” button to purchase a song they just heard. That’s not bad: that’s absolutely dismal. It was recently reported that despite a big ad push and multi-million dollar bundling deals, Jimmy Iovine and Dr. Dre’s Beats Music has had a similarly rocky start, garnering within its first hundred days a subscriber base that is currently in “the low six figures”.


As if that wasn’t enough, radio stations have been shredding listeners left and right. A recent breakdown of media conglomerate Cumulus Media’s recent ratings have shown that stations of virtually every format have been in decline, with WLF-FM (Chicago’s Classic Hits station) showing a decline of 45.9% in the last year, and Minnesota’s sports outlet WGVX-FM down a jaw-dropping 80.8%. Clear Channel isn’t doing much better, as the company is showing a current $4.2 billion worth of debt.


Obviously, a sea change is happening in the music industry, and despite Neil Young’s Pono becoming the third most successful Kickstarter in history, the contingent of fans that will be clamoring for that won’t do things like offset the week of January 12th, 2014, wherein only 4.25 million album units were sold across the United States, the lowest level of physical sales recorded since SoundScan began tracking individual units sold in 1991.


Artists with established fanbases have been releasing music on their own record labels, setting up PledgeMusic drives, and much more to entice people into their realms, but new, developing artists have a tough time breaking in, as traditional outlets and methods are slowly eroding, as some fans simply install apps onto their browsers that enable them to download MP3s of a YouTube video’s audio in a single click (and industry folks that think this is a relatively small contingent of people are absolutely lying to themselves).


Of course, it’s very important to note that despite what many people have said before, there will never ever be a “death” to the music industry. So long as people keep making music, people will keep releasing music, and they’ll do so in new and occasionally profitable ways. The crowdfunded Veronica Mars film did only $2 million at the box office upon its nationwide release, but as Ray Subers of BoxOfficeMojo noted that while it’s “unlikely that Veronica Mars holds well in the long-term (it’s already available on VOD) and many Kickstarter backers received a digital copy [...] this is an interesting experiment, and should prove to be modestly successful for those involved.” U2, Jay-Z, and Tim McGraw aren’t going to have to give up their day jobs anytime soon. Although there is no doubt that the sheer way that people listen to music is changing, things haven’t gotten to a drastic point (yet).


In the above Beats Music article, the issue of a good “conversion rate” is discussed, wherein Beats’ success will be determined by how many people with trial subscriptions can be successfully “converted” into paying customers. Right now, the whole of the industry is changing in a rather drastic fashion. That being said, if warhorses like iTunes plan to continue succeeding, they’re going to have to come through with a way to entice and convert customers beyond a mere 1%-2%. Don’t forget: there’s a lot of time left in 2014, but that 17% between-year-average is showing no sign of declining anytime soon.

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