Digital music sales surpass physical sales for first time

Posted December 4, 2012

By NICKY DIAZ
School of Communication
University of Miami

From vinyl to cassette tapes to CDs, artists have released music through several formats during the past half century.

And, most recently, digital files known as mp3s have taken over the industry. Just a decade after the launch of iTunes, digital downloads surpassed physical music sales for the first time in 2011.

Carolyn Helmers’ vinyl collection features alternative records. So far, she has more than 50 albums, specifically geared toward her collection of girl bands from 1980 to 2000 (Photos by Nicky Diaz).

Carolyn Helmers’ vinyl collection features alternative records. So far, she has more than 50 albums, specifically geared toward her collection of girl bands from 1980 to 2000 (Photos by Nicky Diaz).

According to a Nielsen and Billboard report, digital music sales accounted for 50.3 percent of all music purchases in 2011. Thirty-one percent of album purchases were digital, showing a 25 percent increase in just five years.

Although vinyl album purchases were up 36 percent from 2010, physical album sales were down by 5 percent.

Despite the decline in physical sales, Serona Elton – president of Elton Entertainment, Inc., a consulting service for the entertainment industry based in South Florida – says CDs won’t be disappearing any time soon.

“I don’t think people will forget about physical albums for some time to come,” said Elton, who has worked with EMI Music and Sony Music Entertainment. “Different generations feel differently about having their content in physical or digital form.”

From the 1920s to the 1980s, vinyl records were mainstream. Though cassette tapes proved to have some advantages – you could record mix tapes without much trouble and they were easy to carry around – vinyl remained popular. But in the late 1980s, CDs started to appeal to the masses. Pressing factories were soon shutting down and the compact disc took over.

However, CD stores are now practically extinct. Shoppers seeking CDs find them in small sections of big-box retail outlets such as Best Buy or Target, if at all. Today, digital downloads are the latest craze, most likely because of its advantages. This format allows consumers to make purchases from home rather than driving to the local record store. It also allows listeners to download thousands of songs onto an mp3 player. This may be convenient, but it has changed the market.

Before the digital age, CD sales were the top priority for record companies and musicians. However, there is less dependence on revenue from recorded music sales today. Elton says that both physical and digital music sales have been pushed aside.

“This revenue stream has been greatly reduced by illegal file sharing and the mindset that music should be free,” she said. “Therefore, musicians are looking to other revenue streams to make up the shortfall.”

These other sources of revenue include touring, merchandise, and the licensing of songs or recordings for films, TV shows and video games.

Although physical music sales were recently surpassed by digital music sales, total album sales were up for the first time since 2004, rising from 326.2 million in 2010 to 330.6 million in 2011.

Although physical music sales were recently surpassed by digital music sales, total album sales were up for the first time since 2004, rising from 326.2 million in 2010 to 330.6 million in 2011.

“Overall, a lot fewer people are actually buying their music,” said Heather Ellis, a college marketing representative at Sony Music Entertainment. “This has led record companies to have to tap into other sources of income. To do this, they invented 360 deals.”

360 deals are a type of recording contract where the record label taps into revenue streams other than record sales, such as merchandise, movies, and touring.

“Personally, I don’t view 360 deals as necessarily bad, but I’m not in love with them either,” Ellis said. “I’m concerned that record companies are given too much power to control the artists, but I like that the artist as a brand becomes more streamlined.”

Although these deals are usually tailored to the artist specifically, they tend to serve the company’s needs first, according to Ellis.

Up-and-coming artists in the 21st century have kept these trends and changes in mind while recording and releasing new music. Many independent bands have released music through their own websites as well as sites like Bandcamp, which serve as publishing platforms for bands.

“I think artists feel pressure to give fans free downloads and also to put their music exclusively online,” said Pedro Varela, 17, who has a collection of more than 400 CDs. “I only buy CDs, but I get the appeal of digital downloads, especially with mp3 players in the picture. And of course, the availability of illegal downloads is another pressure musicians have to deal with.”

Streaming services like Spotify have also affected sales.

“Part of the reason that overall record sales are down is that many are enjoying music via legal streaming services, which simply pays far less,” Elton said. “And people continue to download illegally, which continues to destroy the industry for everyone, not just artists.”

With the rise of digital downloads, many artists are resorting to free downloads and exclusive online releases to appeal to fans.

With the rise of digital downloads, many artists are resorting to free downloads and exclusive online releases to appeal to fans.

Carolyn Helmers – singer and guitarist for alternative feminist band Testökra – and her bandmates have considered these factors while preparing for the release of their music.

Helmers said they plan on uploading music to Bandcamp as free downloads as well as releasing a physical copy of the songs, either as a tape or a CD.

“We want to release our music online because anyone will be able to listen, anywhere in the world,” Helmers said. “It gets it out easy and fast.”

In spite of its popularity, digital downloads don’t offer listeners the best quality music available. Ellis says the rise in digital downloads is striking considering the popularity of high sound quality headphones like Beats by Dr. Dre.

“There’s been a weird mix of people going digital and people caring more about sound quality,” said Ellis, who is also a senior majoring in music business and entertainment industries at the University of Miami. “You get a noticeably higher sound quality through analog. I think people getting more and more obsessed with the kind of headphones that they use is in a way kind of compensating for poor quality on digital.”

Although digital and physical music sales will continue to rise and fall, the industry won’t face any major changes anytime soon, according to Elton.

“This is not a surprise as the numbers for digital have been steadily rising as the numbers for physical have been declining,” she said. “It will continue on this trajectory. However, note that this is not the same in every country around the world, and there are still a huge number of physical CDs being sold in the U.S.”

Mp3s and CDs aside, there is a silver lining: Total album sales were up for the first time since 2004, from 326.2 million in 2010 to 330.6 million in 2011, according to a Nielsen and Billboard report.

“I think the future looks good, but I definitely think the industry’s changing,” Helmers said. “The industry is going through a makeover and bands have to adapt, but it’s not necessarily a bad thing.”

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