Nielsen’s annual presentation at NARM revealed a marketplace saturated with albums and songs but light on total revenue. Digital sales have nearly caught physical sales, according to Nielsen, and the point of purchase is increasingly non-traditional in nature.
Half of all unit purchases will be digital by the end of 2010, Nielsen predicted. In this instance, Nielsen used Track Equivalent Albums to represent digital unit sales. It should be noted that an equal number of physical album purchases will result in greater revenue than an equal number of digital album and TEA purchases. With that consideration, expect the value of physical purchases to exceed the value of digital purchases into 2011.
The migration toward non-traditional retail outlets has been swift. In 2001, 68% of all music purchases were in a traditional music store. In 2009, that number is 39%. Nielsen includes iTunes, Hot Topic, Amazon.com and Starbucks in its non-traditional category. Mass merchants’ market share peaked in 2006 at 41% of purchases and has dropped to 33% YTD in 2009.
Additionally, new releases are failing to connect with consumers. In 2008, 35% of album sales were from albums released in that same calendar year. (Over 105,000 albums were released in 2008, nearly 50,000 of them digital-only.) That is the lowest percentage of new release sales in the SoundScan era. It shows two things. First, digital tracks are a good substitute for entire new release album purchases. Second, digital retailers’ vast catalogs, combined with physical retailers’ shrinking inventories, are beneficial to catalog titles. To that point, catalog digital albums were up 37% in 2008 while current digital albums were up only 27%.
Digital track sales are less concentrated toward current hits. In 2008, 40% of all track sales were from songs released in 2007 or 2008 and 60% of all track sales were considered catalog sales.
Even though track sales may be skewed toward older releases, a small percent of albums represented a large share of new release album sales. In 2008, 82% of new release sales came from 950 albums that sold 25,000 or more units.
The presentation also had information that sheds light on the failures of two relatively new formats, the digital album cards and the slotMusic card. In the past seven-plus months, said Nielsen, there had been 105,000 slotMusic album sales through Best Buy & Wal-Mart (Nielsen had tracked 50-plus titles). Over the last year and a half, Nielsen has tracked 76,000 digital album card purchases from 90-plus titles. The devastating news is that average weekly sales for both formats have declined since the beginning of 2009. Since January 2009, slotMusic album sales are down 65% and digital album card sales are down 50%. The top slotMusic album card has been Nickelback’s “Dark Horse.” The top digital album card has been Carrie Underwood’s “Carnival Ride.”