It's official: We're buying less digital music. Just like vinyl, cassettes, and CDs before it, the digital download may have reached it peak, with total sales dropping 4% from last year. The culprit? It's complicated, but expect the already-raging debate over Spotify, streaming, and the future of music distribution to heat up.
Here's a breakdown. In the first half of this year, U.S. music fans paid for 25-30 million digital tracks per week, according to Billboard. In October and November, that number dipped below 20 million. Billboard blames "a web of interrelated stories that show new technologies affecting consumer behavior" for the decline, with the most obvious culprit being that little green and black icon on your home screen.
Spotify, the frontrunner in the growing all-you-can-stream music subscription space, is already the source of ongoing controversy within the music industry. With the news that paid downloads are starting to erode, the anti-streaming rhetoric will likely heat up even further. That's because of longstanding anxieties over the economic viability of the streaming model and whether or not artists can get a fair payout from the arrangement.
The anti-streaming argument isn't new, but it was voiced most prominently (and thus loudly) this summer when Radiohead's Thom Yorke and his producer Nigel Godrich pulled their side project Atoms For Peace from Spotify's library, citing unfair payment to new artists. As we argued at the time, Yorke and Godrich had a point: The financial mechanics of the streaming model might work for major label executives, but that doesn't mean the money always trickles down to artists in sufficient sums.
More to their original point, streaming simply does not pay out as much to new artists (as opposed to established bands streaming their back catalogs) as do the price tags affixed to physical records and digital downloads. In short, selling one's music pays more than renting it out. And now, barely a year after they outpaced physical album sales for the first time, digital music sales are starting to wane, at least according to the latest numbers.
Feeling the heat from this type of negative publicity, Spotify fired back a few weeks ago when it launched a dedicated site explaining its royalty payouts regime, as well as several new features geared toward placating nervous artists. In the near future, artists will have direct access to analytics about their streams and the ability to sell concert tickets and merchandise from their Spotify profile.
Among the trove of statistics and charts put out by Spotify in early December was a comparison of how much money the company pays out to rights holders alongside other digital sources like video sites (read: YouTube) and Internet radio services (read: Pandora). This is, of course, not an apples-to-apples comparison, but the numbers certainly shine a flattering light upon Spotify and its subscription-based competition.
Missing entirely from this breakdown, unsurprisingly, is a revenue comparison between streaming and paid downloads. For Spotify, that angle is far less flattering.
[Image: Flickr user Jimmy Baikovicius]