Is Kid Rock better off not selling his new album "Born Free" and its single tracks on iTunes? After doing the rough calculations, I've concluded that if his new album were available on iTunes, overall revenue would likely be significantly lower.
The decision by some artists such as Kid Rock, AC/DC and Garth Brooks to keep their music off iTunes to prevent a la carte digital song downloads has proven controversial. The album format, with the advent of iTunes, has become unbundled and fades more each year. Consumers clearly enjoy purchasing single tracks as the numbers demonstrate. And while the artist and label ultimately retain the right to sell their music as they see fit, a decision to eliminate track sales is seen as being out of step with the realities of today's market.
Kid Rock's "Born Free," however, flies in the face of this common wisdom. It's sold an impressive 612,000 units, according to Nielsen SoundScan, without a single iTunes download. Taking into account a few assumptions, one can argue that "Born Free" would have sold roughly 294,000 units if fans were allowed to buy single tracks, at least by my calculations. By not allowing single tracks to be sold, Kid Rock has potentially made $3.3 million more in U.S. retail sales.
To figure this out I started by looking at album and track sales for some current hit releases. I looked at ten other popular albums ranging from Drake's "Thank Me Later" to Sugarland's "Incredible Machine." The ten titles average about 910,000 album sales and 1.83 million single tracks from that album. That's a tracks-to-album ratio of 2.12.
The next step is to estimate the rate at which single tracks replace albums. To figure this out I looked at the change in album and single tracks from 2007 to 2010. (I chose 2007 as the starting point because it was the year Kid Rock's previous album, "Rock N Roll Jesus" was released.) Comparing similar time periods, I saw that a loss of 167 million album sales per year had coincided with a gain of about 328 million single tracks per year. In other words, there was a gain of 2.08 single tracks for every unit decline in album sales. This makes sense when you think of how now, with the rise of iTunes popularity, people now have the ability to buy individual songs instead of an entire album.
Next, I combined the numbers to reflect how many individual tracks Kid Rock fans would have purchased and calculated the substitutive nature of those track purchases. The result is about 294,000 albums and 625,000 tracks. But remember that "Born Free" has sold 612,000 units through December 26. (A key assumption is that the number of unique purchasers remains the same in both scenarios. When only the album is available for sale, the number of unique purchasers is clear - 612,000. For these calculations, I assumed the same number of people would buy something if both the album and individual tracks were available. In this hypothetical scenario, 294,000 consumers opted for an album and 318,000 consumers opted for individual tracks.)
The difference in dollars and cents is huge. With only album sales, "Born Free" generated about $7.9 million in retail sales with the album estimated at a $13 average sale price. If single tracks were available, "Born Free" would have generated only $4.6 million in retail sales (assuming the average retail price of a track was $1.29) -- a difference of $3.3 million in favor of Kid Rock not allowing his music on iTunes.
It's important to realize these are rough estimates and assumptions about Kid Rock fans' spending habits. Kid Rock fans may be more avid album buyers than the typical consumer. Or perhaps more consumers would have purchased individual tracks if they had the opportunity. And since some CD buyers may purchase a digital album at iTunes if they had the chance, the assumptions behind the math aren't perfect. But if this was an average situation that reflects the current dynamic between album and track sales, consumers would have bought fewer albums and a lot more single tracks. And as a result Kid Rock's "Born Free" would have generated roughly more than $3 million in revenue.