Business Matters: U.S. Digital Sales Drop in Second Quarter

Digital sales continue to lose the big year-over-year gains they posted early in 2013. Both US track and digital album sales have fallen nearly every week through May 26th, according to Billboard analysis of Nielsen SoundScan data. Exactly what is behind the declines is up for debate.

The big gain won by digital album sales in January evaporated within two months. A 16.2% year-over-year increase in the first four weeks of the year had turned into a 10.4% decline by the first quarter. Digital album sales had a 7.9% gain in the week ending May 26th.

Tracks started strong and were in positive territory for the first five weeks. But tracks fell into a deficit in the sixth week that has grown in nearly every consecutive quarter. Track sales ended the first quarter down 1.3% and had a 2.7% deficit in the week ending May 26.

In contrast to the trend in digital sales, CD sales’ year-over-year change has improved drastically in recent months, going from a 19.5% deficit in early March to 14.0% in the week ending May 26.    

Total album sales finished the first quarter down 4.9%. That deficit got as low as 5.6% in the second quarter and stood at 5.0% in the week ending May 26. Although both current and catalog albums have lost momentum, current albums are currently 0.1% better than last year's pace. Catalog albums fell into negative territory in the third week and were down 5.0% the week ending May 26th.

The big question is why digital sales are slowly eroding. A related question is why digital sales continue to fall while CD sales have regained some of their early losses. Difference in strength of release schedules is a likely culprit, but whatever is driving down digital sales isn't affecting CD sales to the same degree.

The popular sentiment within the industry is streaming services do not negatively impact purchases. That may be true in some individual cases -- look no further than Daft Punk’s Random Access Memories -- but this SoundScan data suggests something is having a continuous, steady effect on digital sales on an aggregate level.