Why 2011 Is the Year Digital Music Broke
2011 could end being the year digital music broke. Yes, the iTunes Music Store launched back in 2003. But 2011 has been a truly incredible year for digital music. Perhaps most important is the big improvement in download sales. This year's increase in digital downloads could result in around $300 million of incremental consumer spending by the end of the year, based on Billboard estimates using Nielsen SoundScan data.
There's a common -- and incorrect -- belief in the music business that nobody pays for music anymore. That claim just doesn't hold water in 2011. Through September 25, the increase in track and digital album sales has a value of about $236 million (calculated simply using $1.29 for tracks and $9.99 for digital albums). American consumers have purchased an additional 12 million digital albums and 90.5 million tracks on top of what they had purchased at the same point in 2010.
On a prorated basis, that works out to a full-year gain in revenue of $314 million (calculated using a ratio of year-to-date-to-full-year sales for both track and digital album in 2010). The gain is split almost evenly between digital albums and tracks. One important asterisk: it does not take into account the debut of the Beatles catalog at iTunes in the fourth quarter of 2010. That factor alone may have skewed the calculations for the prorated figure of $314 million.
Don't miss Billboard's FutureSound Conference, taking place November 17-18 at Terra in San Francisco. FutureSound will feature keynotes from the top minds in investment, technology and music today; presentations that will offer specific solutions structured around answering the most pressing questions; and workshops.
It's quite a turnaround. Through September 26, 2010, digital track sales were actually 43.3 million units lower than the same point in 2009 while digital albums were up 4.8 million units. Taking into account a gain in the average track price, which helps offset the unit decline, the year-over-year gain in revenue was probably $100 million at best.
This has been a great year for music streaming services, too. Internet radio company Pandora had a successful stock IPO, surpassed its 100 millionth registered user and currently has a market capitalization of $2.1 billion. Clear Channel launched its own personalized Internet radio service earlier this month. And on-demand music service Spotify made its US debut in July and now has 2 million paying customers in eight countries, the company's CEO said last week. Rdio, Mog and Rhapsody have also put forth very good products for consumers who want to move their music collections to the cloud.
Startups have brought much-needed excitement to digital music, too. Turntable.fm came from nowhere to become a darling of the music and tech industries. Other non-interactive services have altered the landscape, too. Mixcloud, Shuffler.fm, 8tracks, Songza and others have introduced new ways to discover and enjoy music. Best of all, these services operate under the DMCA's statutory license for webcasters and don't need to acquire licenses from labels. As a result, there is nary an impending lawsuit between the bunch of them.
Improvements in subscription and non-interactive services are important stepping stones to a vibrant digital future. For an industry that wants growth right here and how, however, it's hard to ask for more than a $300 million improvement in download spending.
More and More People Are Using Mobile Devices While Watching TV
-- A high percentage of Americans watch TV and use the Internet at night, but a greater percentage of mobile devices are active during prime time. A blog post by Flurry shows that between 40 percent and 65 percent of all devices running Apple's iOS and Google's Android operating systems are active between 7pm and 11pm. Flurry estimates there are 110 million such devices in the US. That works out to range of 44 million to 72 million devices - the peak hits around 9pm. Flurry adds some context to the size of the mobile audience:
"To put the sheer size of the mobile application audience into perspective, consider that the 'American Idol' finale, which airs once per season, reaches approximately 20 million viewers on that day. Mobile apps already reach more than 20 million U.S. consumers per hour, from 7 am to 11 pm. That's already the equivalent of 17 'American Idol' finales each day, or more than 6,200 American Idol finales per year."
A few parting notes. First, Flurry tracks more than 110,000 different mobile apps but there is only one "American Idol." And as Flurry notes in a page for mobile advertisers http://www.flurry.com/advertisers/index.html, apps get 4.2 minutes of engagement. That's less time than the minutes of commercials in a half-hour sitcom. So collectively apps get a lot of consumer attention, but it's a very fractured landscape. ( Flurry blog)
Groupon Gets Another Competitor
-- Groupon has yet another daily deal competitor. DealChicken is a new local deal site run by Gannett, owner of newspapers and local TV stations around the country. The service first launched in Phoenix in 2010 and now reaches 57 communities including, Atlanta and Nashville in the South, Sacramento in the West, St. Louis and Indianapolis in the Midwest and Portland, Maine in the Northeast.
GrouponLive, the joint venture of Live Nation and leading daily deal service Groupon, isn't in danger just yet. A quick Google search reveals just a few music-related deals. AEG Live used DealChicken for a June 25 performance at Phoenix's Celebrity Theater by Men of Soul. And there's currently a 50% off deal to see jazz quarter Oasis Quarter at the Civic Music Association in Des Moines, Iowa.
Specific Media Hit by Layoffs
-- MySpace owner Specific Media has been hit by layoffs, TechCrunch has reported. The company says the affected employees, totaling "less than 8 percent" of its workforce, were in sales and operating divisions. There is no indication MySpace's pending re-launch or operations will be impacted, and the company's COO has a positive outlook. "We've made great progress in integrating the companies post acquisition, and have identified new ways to streamline the businesses. In addition to the synergies realized, there have been some real innovation and big progress made toward achieving our goals," Chris Vanderhook, COO at Specific Media and MySpace, said in a statement. ( TechCrunch)