Why People Still Buy CDs

If you read the news at all, you probably think that the CD format is dead and buried, but that's far from the truth.

Last year there were more than 170 million CDs sold in the United States alone that could be counted. No one knows exactly how many were actually sold, since so many sales (like direct sales at gigs and online from an artist's website) are under the Soundscan radar.

But as we've recently seen from Adele, there's a large audience out there that will happily buy a CD, sometimes even along with streaming the same music online.

The following graphic from a recent BPI report shows the reasons why many people continue to buy and use CDs.

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Streamers Buy Music Too

While nearly everyone in the music industry complains about the decrease in sales, a new study by the British Phonograph Industry (BPI) and the Entertainment Retailers Association has found that streaming may actually be at least partially responsible for whatever sales there are. Of course, this study was conducted in the UK, but it may be significant nonetheless.

The study found that streaming was a way for users to sample music and artists before actually buying. In fact 44% of the respondents that paid to stream said that their album buying habits have either increased or remained the same.

66% of the music fans surveyed also obtained their music from multiple sources, meaning streaming and CD or vinyl. The general consensus was that users streamed to discover, but actually purchased something they fell in love with.

Surprisingly, the results reflected not only older music fans but younger consumers as well, with the tastes of millennials falling in line with baby boomers in this area.

Also, about 33% of respondents would prefer a "one stop shop" where they could stream content, but also buy the CD on the platform if they wished as well.

Finally the survey found that around 40% of all albums are purchased in the final quarter of the year, with about half of these coming at Christmas. CDs and vinyl records are still prime gifts.

It just goes to show that there's still life in the CD side of the business, which may very well be around for longer than industry analysts predict.

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Superstars Account For Less Than You Think

Most of us think that only the top 1% in music, the superstars, make most of the money.

Well, they certainly do when you take touring and merch into consideration, but not when you look at sales and streams, which will surprise many industry naysayers.

Rockonomic did a recent study based upon Nielsen's 2014 music report and found the following:

• The Top Ten CD albums account for only 6.624% of total CD Album Sales.

• The Top Ten Digital Tracks account for only 3.759% of total Track Sales

• The Top Ten On-Demand (Stream) Tracks account for just 0.98% of total Track Streams.

If these figures hold true for this year as well (and there's no reason to believe they won't), it shows that when it comes to streaming, the average consumer's taste goes beyond the hits.

It seems that the music business is a lot more democratic than we give it credit for. Artists and bands should take heart in the fact that there appears to be plenty of room for other music besides what comes from the superstars.

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On A Positive Note - Music Sales Up Around The World

While we're used to hearing about the gloom and doom in the recorded music industry, it appears that the first half of 2015 has actually been a bright spot in sales.

At the halfway mark in the year, many countries that had previously seen their total sales slip recently have actually recorded increases, and all of it has come from digital music.

Germany, Italy, Sweden and Norway have all seen their CD sales drop by varying amounts, yet their total sales have risen, with streaming revenues rising to the forefront, according to Nielsen. The US and Canada also saw sales increase, although total revenue figures haven't been released.

One of the trends that mostly continues downward is what's known in the industry as Overall Album Consumption (OAC). It's increasingly turning into a single song world as more and more people abandon not only album purchases, but listening via streaming as well.

Interestingly enough, OAC is down in most countries, but actually increased by 14% in the first half of the year in the United States. No definitive reason has been sited, but the feeling is that the figure will even out by the end of the year, yet still stay in the positive range.

What do these figures mean? It means that more and more people are paying for music. Where many consumers previously got their music for free either through piracy or via a free streaming tier, an increasing number are turning to streaming subscriptions.

Now with Apple Music finally launched, and with YouTube's Music Key around the corner, we should see additional increases by the end of the year. My prediction - we'll be surprised at how much the industry has grown at this time next year.

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Big Changes In Music Sales This Year So Far

Nielsen's mid-year music sales report is out and a lot has changed in a mere 6 months. Here are some of the highlights.

• On-demand streaming from services like Spotify is up 92.4% over last year! Over 135 billion songs have been streamed so far this year. Yes, this streaming thing is definitely catching on. 

• Vinyl sales continue to rise at an ever greater rate, up 38% over last year. Vinyl albums now comprise almost 9% of all album sales.

• Digital track download sales are down 10.4% from last year. The bloom is off the rose.

• Digital album sales are virtually flat though, which is good news considering that last year they were down 10%.

• If you add in the new ways of looking at albums in the digital domain (track equivalent albums = 10 and stream equivalent albums = 1500), total album sales are actually up 14% over last year at this time.

• CD sales are down 10%, which is decreasing at a much slower rate that anticipated and slower than we've seen in previous years.

• Physical album sales are down at traditional big-box retail, but up 0.6% at indie music stores, and up a giant 18% at non-traditional vendors like online, at the venue, and direct-to-consumer.

What do these numbers prove? Music is still not only alive and well, but demand and consumption is growing. What we don't see in the Nielsen report is the revenue numbers, and that's where the actual tale is told. We have to wait for the end of the year for that.

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Starbucks To Stop Selling CDs

Even if you wanted to buy a CD, it's getting more and more difficult as retail music stores everywhere continue to close. Starbucks is joining that lot by ceasing to sell CDs and selling off all of its inventory next month. It will stop selling them completely at the end of March.

Starbucks 21,000 stores sold 3.6 million units last year worth $65 million. The coffee giant limited its inventory to only 20 titles or less at a time, and most of these were designed to fit the Starbucks brand.

The company had an exclusive deal with Concord Music Group to supply titles by everyone from Paul McCartney, Diana Krall, Tony Bennett and Alanis Morissette, among others. It also featured a limited number of current hit titles as well, such as Taylor Swift's 1989 and the Frozen soundtrack.

According to a rep from Starbucks, the company will remain involved in music, but only in its digital form, although there was nothing specific about how that will be implemented.

CD sales dropped 15% last year and this year the drop may be even steeper. That was probably going to be the case even if Starbucks had continued selling the format, since its sales amounted to less than 1% of the total CD total in the US.

It's just another sign of the times that the music world we live in is now a digital place.

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Who's Buying Music Today vs 10 Years Ago

A recent survey by MusicWatch looked at the demographics of CD and digital music buyers back in 2004 and compared them to 2014. What they found shouldn't be too surprising, because it's almost exactly what you'd expect.

• In 2004, the largest demo of CD buyers was age 36 to 50 at 25% (and it's 26% in 2014).
• In 2014, the largest demographic of CD buyers were age 50+ at almost 35%.

• In 2004, ages 13 to 17 purchased the most digital downloads at 25%, followed by ages 36 to 50 at 24%.
• In 2014, ages 36 to 50 purchase the most at 26%. Ages 18 to 25 was second at 23%.

• Surprisingly enough, both in 2004 and 2014, women purchased more CDs than men by a roughly 5% margin.

• That flipped around for digital music though, as men purchased far more digital music in 2004 by a 60 to 40% margin. Today women buy more than men by 53 to 47%.

Of course, all this may be moot in a few years as both CDs and digital downloads face ever diminished sales. It's still a huge part of the business in terms of revenue, but the writing is on the wall that streaming music will be the dominant distribution method for some time to come unless a new distribution technology is introduced that takes the industry by storm.

Album Sales Hit A New Low

The album is definitely dropping in popularity, as last week Nielsen SoundScan announced that the sales numbers reached their lowest levels since the company began tracking data in 1991.

Only 3.97 million albums were tallied, the first time that figure has fallen below the 4 million mark ever. Considering that 3 albums debuted in the top 10 and averaged only 31,000 units doesn't bode well for the format, as more and more music lovers abandon the album and move to streaming.

CD sales are down 19.2% from last year at this time, with the big retailers taking an even bigger hit. Mass merchants have fallen 23% while the big chain stores have fallen more than 25%. You can see that it's only a matter of time before there will be no longer be an album brick and mortar retail business.

With this kind of data, you'd think that artists and record labels alike would begin to change their business model and concentrate more on singles, but that doesn't seem to be the case. Artists still seem to think that it's still an album world and spend way too much time and money in that area.

But the evidence keeps on clearly pointing to the fact that consumers don't feel the need to purchase an album or even purchase music at all. And it looks like the trend will only continue.

Maybe the new Apple/U2 album format (whatever it is) will make a difference, but that's still at least 18 months away. By then, after the world becomes very comfortable with streaming, it might be too late.

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Three Reasons Why The CD Is Still Important

Everybody knows that the CD has died, replaced by a digital world where files and streams are the main methods of music delivery. The only problem with that statement is that the CD is not yet deceased by a long shot, and it’s still a real tool in the belt of artists and bands everywhere. Sure, it’s rapidly diminishing in importance, but important it still is. I know that most of you reading this don’t believe me, so let me give you three reasons as proof. 

Reason #1: Last year there were 211 million CDs sold in the United States, according to the Recording Industry Association of America. While this number is down 78% from the format’s peak in 2000, it still amounted to around $2.5 billion in revenue, or about 35% of the income of the entire industry in the US. If you think that there’s weeping and gnashing of teeth in the business now (although it’s far more quiet than it’s been in the recent past), you’d hear some real wailing in record label boardrooms everywhere if the format were to disappear into the ether tomorrow.

Now 211 million of anything is a lot of units, but keep in mind that these are only the sales that the RIAA could count through their traditional distribution channels. This doesn’t account for all the CDs sold independently by artists at gigs, shows, church services, or online, and who knows how many other outlets.  And keep in mind that CDs are a high-margin item that makes not only more revenue per sale but more profit as well. An artist or band selling a few units per night might not seem like much, but this is occurring by the the thousands daily, which adds up to real money that’s not on the books anywhere and never will be. Read more on Forbes.

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So Much For Europe's Record Stores

Maybe this is just Europe catching up to the US, or maybe it's the beginning of the final gasp of the last era of music business, but all over the continent the last of the record store chains are closing.

The famous HMV retail chain in England recently went into bankruptcy, with the fate of all of its 200 stores now in doubt. Workers there recently went on strike demanding unpaid wages from the chain.

In France, the same happened at the 26 Virgin Megastores, and the FNAC chain in Italy was recently sold to private equity investors who are expected to shut stores and cut jobs.

To say the least, things do not look good on the CD/DVD retail front.

Soon the store closings become a self-fulfilling prophecy, as people who genuinely want to buy a CD can't because there's not a retail store open near them. This is certainly the case in the US, where their are major cities without a single CD retail outlet.

That being said, CDs are still a big business, as people do buy them online and at concerts and gigs. In fact, there were 326 million CDs sold in 2011 (it's too early for the 2012 tallies yet) that we know of. I say that because a lot of CDs are sold privately at gigs or online that Soundscan never sees, so aren't included in the totals.

Still, you can see the writing on the wall. Anyone who has experienced the convenience of digital music just doesn't want to go back. And with hi-res digital music coming more and more available, the increase in quality will leave CD lovers in the dust.

Of course the business model of selling CDs is the thing that record labels, artists and publishers alike grieve over, but let's face it, that ship has already sailed.

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CDs Still Dominate Album Sales

Here's something that might take you by surprise. According to Nielsen Soundscan, more than two-thirds of all albums purchased in the US in 2011 were physical CDs.  That means that out of a total of 330.6 million albums sold during the year, 223.5 million of them were discs, or 67.6 percent.  
That said, a few days ago the UK's BPI stated that 76.1 percent of all albums purchased last year were CDs, so they're still somewhat behind on the digital transition.

Want some good news about music sales? In the US, album unit sales were actually up by 1.3 percent last year, while the sales of CDs slumped 5.7 percent. Digital albums also gained a healthy 19.5 percent to reach a record 103.1 million units.  But the big winner was vinyl, which was up by 36.3 percent to nearly 4 million units. Will 2012 show the same results?

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Help support this blog. Any purchases made through our Amazon links help support this website with no cost to you.

You should follow me on Twitter for daily news and updates on production and the music business.

Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.