Music in 2014: Taylor Takes the Year, Republic Records on Top, Streaming to the Rescue

Taylor Swift performs just before midnight from Times Square in New York City on Dick Clark's New Year's Rockin' Eve 2015 on ABC.

ABC/Lou Rocco

Sales are still the dominant revenue generator for the industry, and record labels have adapted other measures in an effort to try and capture that industry's economic output. To that end, the industry recognizes 10 tracks as equaling one track equivalent album (TEA). (The average wholesale price per song is $0.75, with 10 tracks equaling the average wholesale album price of $7.50.) The industry calculates that a stream equivalent album (SEA) equals 1,500 streams. (That's an average payout of half a cent per stream, totaling $7.50. In 2013, the average payout per stream was $.0.00375, thus in that year 2,000 streams equaled one SEA unit.)

Digital track sales declined more than digital album sales, dropping 12.5% to 1.1 billion, from 1.26 billion downloads in 2013. Digital album sales dipped 9.4%, to 106.5 million units from 117.6 million units in the prior year.

Last year, album scans plus TEA totaled 367.3 million units, an 11.6% decline from the 415.3 million units tallied in 2013. This decline is the largest in the digital era, which began being tracked in 2004, the first year that Nielsen Music (again, SoundScan at the time) gathered digital sales. Prior to 2004, the biggest decline in album sales was recorded in 2002, when album units were down 10.7%.

Though album sales declined 11.2% to 257 million units from the 289.4 million tallied in 2013. Albums-plus-TEA dropped 12.5%, to 110.2 million from 125.9 million units -- a combined decline of 47.9 million -- streaming more than made up for the downturn. Overall streams of individual songs grew to 164 billion, from 106 billion. Streaming equivalent albums (SEA) units hit 109.3 million unit, up from 53 million units, an increase of 56 million equivalent album units, according to Nielsen Music.

But if you look at SEA on a constant ratio basis, using this year's metric of 1,500 streams per SEA for both years, then 2013's total becomes 70.7 million SEA units. That represents an increase of just 38.6 million SEA unit instead of 56 million SEA units, which consequently leaves the U.S. industry about 9 million units shy of offsetting the 48 million deficit in albums plus TEA.

The takeaway: positive growth for the U.S. industry.

In addition to streaming's strong and continued growth, there was another welcome silver lining in 2014, at least in the fourth quarter: album sales dropped only 3.5%, thanks to a strong release schedule during the period and vibrant catalog sales.

Within album sales generally, CDs were down 6.1% in the fourth quarter, as compared to the 14.9% decline the album format posted for the whole year. CD scans tallied 140.9 million units, compared to 165.4 million in 2013. Digital album sales were down 2.7% in the fourth quarter, a better showing than the 9.4% drop the digital album format experienced for the complete year, when units dropped 140.8 million (compared with 165.4 million the year before).

Looking at album sales another way, current album sales (defined as sales within the first 18 months of a title's release -- longer for albums that remain in the top half of the Billboard 100 and/or have tracks still being played by mainstream radio) continue to underperform compared to catalog album sales, with the current albums down 14% to 130.5 million, versus an 8.1% decline for catalog sales, at 126.5 million units.