While the U.S. music industry suffered through its worst sales year since the advent of SoundScan (now Nielsen Music) in 1991, streaming was so strong last year that the industry nevertheless saw growth — yes, growth — in 2014, when new metrics to measure music revenue are taken into consideration.
But before getting into the nitty-gritty, let’s look at the top sellers for the year. Taylor Swift’s 1989, released on Oct. 27, pulled off some amazing sales feats. After a first-week debut of 1.29 million units — a feat that many thought was impossible in today’s sales environment — 1989 became the year’s best-selling album in the very last days of 2014, helped in part by its absence from streaming services. However, for the first 51 weeks of the year, Frozen was the clear frontrunner. Swift’s album scanned 3.66 million units in total, versus the 3.53 million tallied by Disney’s runaway hit soundtrack. Since its release, Frozen has scanned 3.9 million units (the film’s soundtrack was released in late 2013, cutting off the eligibility of those 400,000 units when measuring 2014’s sales total).
The pair were two of just four albums to hit the million-unit mark in 2014: Sam Smith‘s In The Lonely Hour sold 1.2 million units, and Pentatonix‘s That’s Christmas To Me scanned 1.14 million. In 2013, 13 albums moved over a million.
Not surprisingly, the year’s top-selling albums were also the top 3 digital sellers. Swift’s album was downloaded 1.4 million times; Frozen 1.26 million, and Smith 573,000. Meanwhile, Pharrell Williams‘ “Happy” earned its stripes as the most downloaded song of the year, moving 6.46 million units, according to Nielsen Music.
CONTINUED: STREAMING FIGHTS ALBUMS’ CONTINUED DROPSales 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.
CONTINUED: LABELS’ MARKET SHARE
Now let’s break down the labels. Republic Records was the top label overall of 2014, capturing 8.97% of total overall album sales plus track equivalent albums (TEA). Billboard finished 2014 using that measure to rank labels — now, with the introduction of Christian scans in Q3 2013 included in the overall U.S. market tracked by SoundScan, Nielsen Music has introduced a new marketing report entitled “Industry Market Share plus TEA,” which Billboard will use going forward to rank labels. See the label market-share rankings below to see how that change impacts the rankings. In any event, when looking at the Industry Market Share report for 2014, including the scans from Christian retailers, Republic remains on top with 8.74%.
Indie labels had a banner 2014, grabbing 35.1 percent of the market. On the distribution side, Universal Music Group, home to Republic and Capitol, remains the undisputed leader, with a 38.7 percent share but flat year-over-year. Sony Music, and its labels Columbia and RCA, continues to challenge.
CONTINUED: SALES BY GENRE
Within the genres tracked by Billboard, rock was the most resistant to the year’s sales downfall, falling only 8.3% to 85.3 million units, as compared to the overall album sales decline of 11.2%, as noted above. Christian/gospel also managed to beat the average, with scans falling 11.1% to 117.4 million units. EDM suffered the biggest decline of all genres tracked by Billboard, falling 26%, to 5.3 million units. R&B and hip-hop was down nearly as much, showing a 25.2% drop to 35.7 million albums from the 47.8% million units tallied in the prior year.
Inversely, when looking at digital track sales, rock was the worst-performing category of the large genres, falling 17.3% to 235.2 million units, down from 284.3 million units. Latin was the only large genre to show growth, increasing 2.9% to 19.8 million units, from 19.3 million downloads in 2013.
CONTINUED: RETAIL CONTINUES TO DROP
Analyzing sales by store type, non-traditional CD merchants — which includes online stores like Amazon, chains like Starbucks and concert venues — were the only category showing sales growth, increasing 5.2% to 38.6 million units, up from the prior year’s total of 36.9 million units. Independent stores also held their own, moving 18.2 million units in 2014, versus the 18.3 million scans counted in 2013, a decline of 0.5%.
Once again, large chains — like Best Buy, Trans World Entertainment and Barnes & Noble — were the big losers, with sales falling 20.6% to 31 million, from 39 million units in 2013. Likewise, mass merchants, such as Walmart and Target, also dropped 19.3%, to nearly 63 million units from 78 million scans in the prior year. And as noted, download stores declined 9.4%.
A version of this article first appeared in the Jan. 17 issue of Billboard.