The Cents in Downloaded Music

In the final week of 2006, Beyonce’s song “Irreplaceable” set a new record for a single digital track, selling 269,000 copies in one week. What exactly does that mean? Looking beyond the numbers, we see a clear shift in how downloadable music is perceived. It is now a viable metric in gauging the popularity of a single without the bias of the artist. Music is being judged and purchased strictly on its individual appeal and quality, which is refreshing after decades of being forced to buy whole albums containing three to four good songs and twice as many bad to mediocre tracks. Anonymous artists can compete with the big record labels and their stable of marketed artists through companies such as rumblefish.com and inGrooves.com, which provide distribution and licensing for these independent artists. Fortune 500 companies and Madison Avenue can shop at these web sites to find and license the music of these independent artists to feature in marketing campaigns just like mainstream artists’ music. It would make sense for an artist like Jim Jones who has the #1 downloaded rap single according to Billboard music, “We fly high”, but only sold approximately 267,000 units of his album, Hustler P.O.M.E., not even gold status according to industry standards. There are many artist like him that could generate a better return by promoting, selling, and licensing one single as opposed to putting that same effort and significantly more money into producing and subsequently promoting an entire album.

U.S. album sales continued to decline, about 588.2 million albums were sold in 2006 — a 4.9 percent decline from 2005. However, overall music sales increased by more than 19 percent in 2006, a number that includes all albums, singles, music videos and digital downloads. A closer look at the numbers shows where the growth in music really took place, the digital music landscape. Digital song sales grew 65% during 2006, reaching 582 million, according to Nielsen SoundScan. Digital album sales more than doubled from 2005, with 32.6 million albums sold, making up more than 5% of the 588.2 million total album sales. Digital song sales only trailed album sales by slightly more than 1%. If digital album sales are subtracted from total albums sales, then digital song sales are outselling albums. A discrepancy that can only be expected to grow as both cell phone/iPod users upgrade to the Apple iPhone, Microsoft's Zune gains traction, and cell phones capable of playing downloaded music become standard and more affordable.

Billboard magazine senior correspondent Brian Garrity said consumers are buying more single songs and fewer albums, and that makes it harder for the record industry to maintain profits. “At the end of the day, pop music is a singles driven business, so why would I want to buy a whole album?” Garrity said. Music has become a much more democratic process with the proliferation of iTunes, satellite radio, and ring tones. I wouldn’t be surprised if artists focused more on developing and selling singles as opposed to creating the traditional 12 to 14 track CD’s. The average consumer only listens to approximately 40% of the songs on their CD’s with the average music CD retailing for $14.99 (for the sake of this blog we will use an average of 13 tracks per CD) this breaks down to $1.15 per song. The average listener should spend $5.98 for the music they actually listen to, saving them $9.01 which is spent on unwanted or simply mediocre music. By contrast, individual songs are sold at $0.99 cents at the iTunes store and Napster.com, $0.88 cents at Walmart.com, while Yahoo offers a subscription service for $12 a month to their music library of 12 million songs. Those are numbers that the record labels can’t compete with. In the current digital age, you’re better off buying six songs from iTunes or Walmart.com that you’d be 100% satisfied with rather than wasting $9.00 every time you want a new song. And that’s without considering the amount of physical space you’re saving.

This information isn’t new however what is, is the proliferation of small companies like rumblefish and inGrooves that allow artists to distribute their most popular singles and make a comfortable living as one hit wonders as opposed to the traditional album distribution model. These are both digital media publishers and technology companies, which execute distribution, marketing and licensing services (music to television, films, video games, and ringtones). Making a compelling shift in how music is both sold and distributed in today’s web 2.0 environment, leveling the playing field for lower profile artist to compete with their more popular peers.