As Downloads Dip, Music Executives Cast a Wary Eye on Streaming Services

By BEN SISARIO
Published: October 20, 2013
http://www.nytimes.com/2013/10/21/busin ... vices.html



As sales of CDs plunged over the last decade, the music industry clung to one comfort: downloads continued to sell briskly as people filled their computers and iPods with songs by the billions.

Now even that certainty seems to have disappeared, as downloads head toward their first yearly decline.

So far this year, 1.01 billion track downloads have been sold in the United States, down 4 percent from the same time last year, according to the tracking service Nielsen SoundScan. Album downloads are up 2 percent, to 91.9 million; combining these results using the industry’s standard yardstick of 10 tracks to an album, total digital sales are down almost 1 percent.

After enjoying double-digit growth in the years after Apple opened its iTunes store in 2003, song downloads began to cool several years ago. But the rate of decline this year — weekly sales began to lag in February, and the drop has accelerated rapidly in recent months — has caught the business by surprise.

Music executives and analysts disagree about exactly what is causing this slowdown, but many cite streaming music services like Pandora, Spotify and YouTube as one possible cause. After a decade, consumers may be losing interest in buying downloads and instead turning to the streaming services, which make millions of songs available at the tap of a smartphone app, free or for a few dollars a month.

Even as downloads decline, however, some experts say that rapidly growing income from streaming may finally help turn the overall industry toward positive results. Last year, streaming and subscription services generated $1.03 billion in revenue, up 59 percent from the year before, according to the Recording Industry Association of America, and many of these providers are reporting robust growth this year.

Whether streaming has had any demonstrable effect on sales remains intensely debated, though. Do Spotify and YouTube, which let users choose the songs they play, cannibalize sales, or lead listeners to songs they may buy later? And do Pandora and other radiolike providers — Apple introduced a similar feature, iTunes Radio, last month — compete with sales at all, or just with radio?

“We just don’t know that consumers are abandoning one to go to the other,” said David Bakula, a senior analyst at Nielsen.

Some experts also point to the rise of Android devices as a possible factor in the drop in downloads. While phones using Google’s operating system now represent a majority of sales, Google’s Play store remains eclipsed by iTunes, by far the dominant music retailer.

Some research also suggests that Android users may spend less money on music than Apple customers. The NPD Group, a market research firm, reported this year that 54 percent of iPhone users — whose operating system is iOS — said in a survey that they were likely to buy music, compared with 30 percent for Android customers.

“As Android expands its market, and if Android users are less likely than iOS users to pay for music, we should expect to see evidence of changes in digital sales,” said Glenn Peoples, the senior editorial analyst at Billboard.

No publicly available sales data directly supports this premise, however, and others dispute it. Mr. Bakula, the Nielsen analyst, said that “whether or not Android users download less than iOS users, there’s no reason to think that that is having any impact on year-over-year sales.”

A Google spokeswoman declined to comment.

Whatever the reason for the decline in downloads, many analysts and executives say they are bullish on the industry’s prospects, largely because of the rise of streaming.

“A variety of access models are collectively generating a healthy amount of revenue for labels and artists,” said Jonathan Lamy, a spokesman for the recording industry association. “We’ve still got a ways to go, but when you add up revenues from all of these models, in the aggregate, they represent real revenues now and prospects for a bright future.”

This all made me think about where the "music delivery" industry may be headed. When radio was the primary source of of music for most people, those who preferred their own programming would buy records so they could hear what they wanted when they wanted it. In general radio provided a much greater range of selection, but one's one collection was customized to one's particular interest(s) and was under ones's absolute control. [Some of us - not naming names here - probably had as much selection in their private collection as half a dozen radio station libraries. But that's a whole other story.]

If most people (and again, present company and most readers of this post excluded) can get both selection and control by streaming what they want, when they want it, why would they do anything else? The selection can potentially be even greater than several dozen radio stations, and the control is absolute. Besides, the fidelity is all that most people want, so why download anything or buy a physical product?

I can't see why the whole of the mass market won't end up there, and soon.

I finally broke down and signed up for Google Play Music All Access and wish I had done it sooner. $9.99 a month and I can listen to pretty much any album that I want. I can add albums to my music library where they are mingled in with the cds that I have ripped and uploaded. I can pin these albums that I am renting for offline listening.

I haven't been buying as many cds as I used to. Now I'm focused on a handful of certain artists where I just buy whatever they put out. I probably have hundreds of cds that I have bought and only listened to a couple times because I was into that at that particular time and haven't listened to them in years. GPMAA is going to fill that void for albums or artists that I am crazy about for a week and then don't care about anymore.

The appreciation of music: From bad to worse.

Like the idea of all this in theory. What I'm afraid of is that it could be a long time before services are streaming everything in decent quality. Not even asking for hi-rez here (although that has to be the ultimate goal), but just nice CD quality. For sampling music, they're already good. For getting a quick fix of something you'd never actually want to buy, absolutely. But for dedicated, repeated listening to a favourite artist, streaming is still in the tinkertoy stage.

I just want CDs/DVDs/BluRays as a physical medium. I have no interest in mp3 or streaming.

I did get the Grateful Dead Studio Albums in HD 96/24 kHz because you can't get them on DVD or BluRay, but that was a one off.

My worry - on some deep-down psychological level, I must presume - is that anything that isn't "in my hands" can be taken away at a whim. Even if I could listen to any piece of music ever recorded on demand and in superb fidelity to boot, who's to say it will still be on line tomorrow?

It's a remote chance, I know, but I think it's what drives my passion to collect, and perhaps the same motivation lies behind many collectors' missions.

I don't think that would ever happen. That would be like a company unilaterally deleting a book from its e-readers...wait...oops.

http://gizmodo.com/5317180/big-brother- ... of-kindles

That's one of my fears with a cloud-only library - that and finding myself without Internet access. Not that I fly a lot, but flying is prime listening time, and without a connection, I'd be stuck, to cite just one example.

Maybe they should cast a wary eye on the 99 cents price tag for an mp3.

To a certain extent, it's already happened, in that when you purchase a download, you are essentially buying a license to listen to that music on demand from a finite number of computers that you will ever own. (Yes, you can burn a song to CD and get rid of the DRM, but I believe there is a finite number of time you can do that as well.) More to the point--you can share a download, but you can't really sell it. This is, as with everything digital, still uncharted legal territory, but I don't think it is at all possible to leave any downloads in your will to any designated individual (although I suppose you can "bequeath" your passwords to somebody.)

I'm not using all access but I do have my full music library online and use Google Play Music all the time. It's a great (and with my own music, free!) service, which lets me upload 22,000 songs...a lot of music! It would take a lot for anyone to convince me that they can tell the difference while driving in their car on the stereo between a 320kbps MP3 and a CD. Add in the convenience of never needing anything but my phone and a bluetooth connection or aux jack to listen to ALL of my music, and it can't be beat.

I still might do the all access sometime, just for those times I feel the need to listen to something trendy that I won't care about in a week.

A latest example of downloading folly is the fact that at Amazon you can purchase the new Def Leppard 2CD + 1 DVD set with an immediate free download of the album for $14.88

Or you can purchase only the download for $15.98.

I'd love to see the majors go under & the entire "industry" go to a lossless download model controlled solely by the artists (though of course the bean counter management companies would still find lots of ways to rip off both the artists & the consumers)

But if the entire music industry suddenly goes to a lossless download model, what's to stop the lossless download providers from ripping everybody off?

I hear your point & can't even effectively argue against it; other than if the bands truly controlled it they could always switch to an honest provider.

A few months back, I was given a crash course in the whole idea of the economic curve. It completely altered the way I thought about, well, anything involving money.

Care to elaborate?

This seems sensible to me, Spiderboy, and I share your concern. In a small way (small as in lower fidelity) I've already experienced this with people's YouTube uploads. For example, there were a handful of Onlookers rarities online at the beginning of this year -- I downloaded local copies out of the same worry you express -- and sure enough, the uploader closed his account and all the recordings vanished. Very glad I saved copies for myself.

As an aside:

It would probably be too difficult for YouTube to consistently discern between public and privately owned material, but I've felt for a while that uploaders shouldn't have control over anything they don't actually own themselves. It's terrible when somebody has provided, say, an old TV series that isn't available anywhere else, but it all gets deleted when he closes his account. Those uploads really should remain, since he didn't own the material to begin with.

Digital Downloads haven't had DRM for many years.

I share the concern. As my Oppo has the last firmware that allowed playback of SACD ISO's before Sony forced them to remove it, I will not connect the player to the internet under any circumstances (automatic firmware update fear).

Interestingly, Oppo re-added the ability to the 103/105, & I recently read that they're being forced to remove it again.

On a related subject, with Won 98 Zone Alarm did a splendid joob of preventing programs from calling home. With XP, at one ZA messed up & completely broke all internet connectivity for any XP box. As I don't have time to mess with that issue, I blew off ZA.

Does anyone have any idea regarding the quality & reliability of Zone Alarm these days? The stock Win Firewall doesn't prevent much of anything from calling home.

Well, whatever you call it where even if I delete a song from ITunes that I once purchased, it remains with my ITunes account--but I'm only allowed to move my songs to a limited number of hard drives?