Music seems to be present everywhere today. We frequently notice iPods, iPhones, Blackberrys, and identify ringtones. However, the statistical record continues to disappoint.
The Nielsen SoundScan annual summary for 2009 is a good example. Music transactions appear to have increased by 2.1%, totaling 1.5 billion. But the data only tracks units sold and does not provide information on the total value of music sales. This is likely to fall again in 2009, and should be confirmed when the RIAA releases its numbers in the next couple of months. Like prior years, purchases of single songs and digital albums do not make up for the overall decline in physical album sales.
Lady Gaga, however, continues to inspire. She was one of the major movers in digital sales, and became Top Selling Digital Artist of 2009. She also had two of her songs listed in the Top Selling Digital Songs of 2009. In December 2009, we saw the rising pop star Ke$ha, break the digital downloads record with her single “Tik Tok” that was downloaded over 1.5 million times, selling 611K downloads in one week.
This past year, the labels finally incorporated a new way to sell the highly demanded digital download. They chose to implement variable pricing for songs distributed through Apple’s iTunes, after signing off with Apple’s CEO Steve Jobs. Songs whose demand was deemed ”inelastic”, or firm, were raised in price to $1.29, in a quest to maximize label revenue (you can track the history of this new policy by searching “variable pricing” or “price elasticity of demand” at www.thembj.org).
Variable pricing is only a palliative for the labels, but it helps. Useful too is the appearance of new online business models that stream music. Spotify, in Sweden and the UK, offered most hope. Spotify garners revenue from advertisement, not music sales, although the figures it has collected so far have been small. US labels, in particular, will need more reassurance if they are going to license their catalogs to an unproven prospect.
Music in the Lala “cloud” may have a future. Lala allows the user to stream once for free and then, for just 10 cents, invites song streaming from anywhere. Apple’s acquisition of Lala has led to speculation that iTunes will be launching a similar service. As wireless Internet is becoming more readily available, Lala could looks better.
While the recorded music industry is struggling to be stay afloat, the live music scene has been moving along with some ease. Live Nation saw incredible growth throughout 2009. The company’s revenue in the third quarter of 2009 increased by 13.8% over the previous year, and it ended up grossing over $1.8 billion. Through its creative promotions and its overall control of the live music scene, Live Nation has become one the most successful companies in the music industry. It is now merging with Ticketmaster, and the details of the merger are explained elsewhere in this issue.
Finally, as far as new artists go, 2009 maybe memorable for Lady Gaga, Taylor Swift, Susan Boyle, and Ke$ha. That could be plenty. But with a fragile economy and recorded music still being used as an accessory product to sell other goods and services, the prognosis has to be guarded. Alas, neither is Michael Jackson going to be around in 2010.
By Steven Gringer