After Averting A Decline In 2010, Digital Tracks Continue Growing

A sustained uptick in U.S. sales of digital tracks has provided labels a glimmer of good news for record labels amid a continued decline in overall music sales.

While there's no broad consensus about the factors behind the modest recovery, EMI's reissue of the Beatles' catalog last fall, continued strong sales of Taylor Swift's third album, "Speak Now," and the popularity of the "Glee" soundtracks have clearly played a role. Growing consumer acceptance of the $1.29 price point on current hit tracks also appears to have helped.

Digital track sales were down 0.7% through the first three quarters of 2010 from the same period a year earlier, according to Nielsen SoundScan, raising concerns that they were headed for their first-ever annual decline.

But a 6.3% jump in fourth-quarter digital track sales from the prior year enabled the configuration to eke out a 1% gain for the year. And year to date, track sales are up 3.8% through the week ended Feb. 6, according to SoundScan.

The Beatles' catalog, which made its belated digital debut on iTunes on Nov. 16, generated sales of 5.2 million through the end of 2010 and an additional 875,000 year to date, according to SoundScan.

Many executives also consider Swift's "Speak Now" a key factor in the sustained strength of overall track sales. In addition to moving more than 1 million units in its debut week, "Speak Now" also generated track sales of more than 4 million by year's end and 656,000 year to date.

Fox's "Glee" has also been a major sales driver. "Glee," which had its season debut at the end of September, generated digital track sales of 4.6 million in the fourth quarter and sales of another 782,000 year to date through Feb. 6, according to SoundScan. Leading the way was "Glee: Volume 4," released on Nov. 30, with sales to date of 3.1 million tracks, while the "Glee Christmas" album has sold 635,000 tracks.

Some executives speculate that the Beatles' arrival at iTunes helped other artists. "My guess is that the Beatles brought the casual consumer into the digital store and while they were there, they also bought other legacy tracks," one major-label catalog executive says.

The numbers seem to back up that theory. About 11.6 million catalog tracks were sold in the week the Beatles went to iTunes and 11 million the following week-the best two weeks for catalog sales since August. Current track sales also appeared to benefit from the Beatles' iTunes debut. The 11 million current tracks sold the week of the Beatles' bow and the 10.8 million current tracks sold the following week were the best of 2010 to that point.

Executives Billboard spoke with were less in agreement over factors other than strong releases. Two executives suggest that the $1.29 price point, which initially slowed track sales after its introduction by iTunes in 2009, has now finally achieved consumer acceptance and is no longer retarding track sales growth.

But other major-label executives say they never bought into the belief that the price point stalled sales growth. "There was a lot of other noise going on around the same time, not the least of which is that app sales took off," one executive says. "App sales could have been impacting track sales." Another executive agreed and pointed out that higher prices have made up for any negative impact on unit sales. "We were never negative on the revenue side."

Another reason for the relatively strong finish to 2010 could be the unimpressive finish to 2009, when higher prices on current hit tracks appeared to put a damper on sales, an executive points out. In the two-week period including and following Christmas 2010, track sales totaled 86 million units, according to SoundScan.

Some of the fourth-quarter increase could carry into the future. A major-label executive says he believes part of the fourth-quarter increase was due to increased ownership of connected mobile devices and a corresponding increase in tracks purchased from those devices. "We've only reached something like 16% of the U.S. population with digital," he says. "I think there's a lot of room to grow."

••••Additional reporting by Ed Christman.

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