2012 Music Sales: No Reason To Celebrate Yet

In the last few days just about every print and online publication has had an article about the triumph of the music industry last year. It seems that sales were up for the first time since 1999, which no doubt is a good thing. But look a little closer at the stats and you have to come away with a "hmmmmm."

According to reports from both the international trade group IFPI and research company NPD Group, last year's sales jumped 0.3% to around $16.5 billion, and digital music, which increased 9%, represented 34% of that total. All well and good there.

Then you read that a lot of that was due to the fact that music piracy was down a lot last year:

• Consumers using P2P services to download music declined 17%
• The volume of illegally downloaded music files from P2P declined 26%
• Music files burned and ripped from CDs owned by friends and family fell 44%
• The number of files swapped from hard drives dropped 25%
• The volume of music downloads from digital lockers decreased by 28%
• 40% of consumers who illegally downloaded in 2011 stopped doing so in 2012

On the surface, all good news. By every account, music piracy is on the decline. But think about it - all this and total music sales only rose 0.3%?

Something's not working with these numbers, but I suspect it's the same as when the RIAA and IFPI were claiming that for every one sale, somewhere between 9 and 19 were pirated, depending upon the day and what side of the bed the researcher got up on. Let's face it, numbers like these were never dependable in the first place.

Here's something else that's scary. The biggest selling album of 2012 was the same as 2011; Adele's 21, this time with 8.3 million compared with over 18 million the year before. Once again, on the surface it's great that any album in the Music 3.0 age (soon to be Music 3.5 by the way) can sell this many, but bad in that there was no new album released in 2012 with enough juice to overtake it.

I don't want to come off like a naysayer, since I'm the biggest proponent that things aren't as bad as they're sometimes made out to be, and what we're living through is only the natural evolution of things. I'm just saying to always take industry numbers with a grain of salt.

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2012 Worldwide Digital Music Sales Up

After a couple of very flat years in digital sales that really had the music industry massively scared, it looks like 2012 will once again show an increase, perhaps even a substantial one. According to research analysts Strategy Analytics, 2012 should look like this when it ends:

• streaming revenues up 40% to $1.2 billion.
• downloads up about 8.5% to $4.3 billion.
• total digital music sales including mobile up 18% to $9.5 billion
• digital music increases to 39% of all music sales

The interesting thing is that there's still a lot of physical product being consumed, if digital is only 39% of the total music sales. If that holds true, that means that the total world-wide recorded music sales should come in at somewhere around $25 billion, which is a lot better than it's been for years.

On November 1st I'm going to be at Bilkent University in Ankara, Turkey to give the keynote address at the ATMM Conference. My theme for the talk is "The Music Industry Is NOT Dying." These figures illustrate the point completely.

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The 2011 Music Sales Figures Are In

Finally we get a chance to look at the world-wide music sales figures from 2011, thanks to the IFPI's annual year end report called Recording Industry in Numbers. Here's what we found:

• Global sales were down 3% from 2010, but overall revenue was up to $16.6 billion. This was due primarily to increased global sync license revenues, which is still climbing.

• Physical sales slumped again by 8.7% globally to about $10.2 billion. 

• In the US, about 240 million CDs were sold, which amounted to about $3.41 billion.

• Digital revenues grew by 8% to $5.23 billion. Digital now accounts for 31% of the music market.

• Global performance rights revenues also grew by 4.9% to $905 million in sales, which accounts for about 2% of global sales.

• The US is still at the top of global sales, registering $4.37 billion, which is about what it was last year (although the RIAA claims the figure was more like $7 billion). Japan is second with $4.09 billion, which decreased by 7% over the previous year. Germany comes in 3rd with $1.47 billion, and the UK comes in 4rth with $1.43 billion.

• Fees from subscription services like MOG, Spotify and Rhapsody were up in the States by 14% to $241 million, with total subscribers growing to 1.8 million.

The biggest selling hits? Hold on to your keyboard:

• It's no surprise that Adele's 21 was the biggest seller, moving 18.1 million units word-wide and 8 million in the US. Michael Buble's Christmas came in second and Lady Gaga's Born This Way came in third, although sales figures weren't given.

• Bruno Mars had two of the biggest selling digital songs of 2011 with "Just The Way You Are" selling 12.5 million units and "Grenade" selling 10.5 million. LMFO's "Rock Party Anthem" came in third globally with 9.7 million units.

What's it all mean? First of all, the music industry is still huge by any stretch of your imagination. It's a $16 billion business that appears to have its decline leveled off and is on its way back.

Secondly, there were 240 million CDs sold in the US last year. Think of that - 240 million! And those are only the ones we know about. It's going to take a while until this format dies.

Thirdly, subscription is already throwing off about a quarter of a billion dollars in revenue with only 1.8 million total subscribers. Imagine what this will be like in the future as a revenue generator.

Lastly, everyone who's said the era of the blockbuster selling album was over was wrong, and Adele proved it by moving 18 million units in a year.

I've said it before, and the numbers prove the point - the music business is not dying. It may be morphing, changing, evolving or shifting, but it's not dying.

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The Music Business Is Not Dying

As all the various research and trade organizations begin releasing their 2011 sales figures, a number of them have jumped out for perfectly defining the state of the music industry today. Check this out:

• US album sales were up 1.3% last year, the first year since 2005 that's happened. 66% of these sales were CDs.

• There were 249 million albums sold in the US last year. People will tell you that the music industry is dying, but 249 million of anything is still a huge number.

• 75% of all CD sales were made offline. That means that people physically purchased the CD at a brick and mortar store or an event.

• 40% of all CD buyers are over the age of 45, which means that the demo that mostly grew up with CDs are the ones still buying them.

• Vinyl sales increased 37 percent in 2011, but only accounted for 1.2 percent of all physical sales. That doesn't mean that people who buy vinyl actually listen to it. Just like the old days, many still buy it for the cover and the artwork, and the trendiness (which is new).

• Rock is the most popular genre of music, with 32 percent album share, while pop music represents 40 percent of all current digital tracks sold. Ninety-three of the 100 best selling vinyl albums in 2011 fall within the Rock or Alternative genres. I guess that means that the hip-hop and rap trend has run it's course.

• People who live in New York or LA buy more country records than those who live in Nashville by almost 2 to 1. Having just come from a speaking tour in Nashville, I can tell you first-hand that it's a very cosmopolitan music town, with country no longer the major part of the industry as it once was. That said, country music represents 13% of the total album sales.

• Digital country music sales are up 31% over last year. While it might have been true that country music lovers were slow to get into digital music, that's obviously no longer the case.

• Acts that perform at halftime during the Superbowl get an average sales bump of 555%. Critics may pan them and you might hate them, but you still buy them.

All these numbers (which mostly come from Nielsen Soundscan and the IFPI) show that the music business is still huge, is still extremely diverse, and is still as quirky as ever. It is changing, morphing, shifting, and evolving, but it is not dying.

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Album Sales Rise For The First Time Since 2004

Yes, your eyes aren't deceiving you. Something in the music business besides vinyl actually went the other way for a change, as in up. Nielsen Soundscan, the people who officially measure music sales, found that through the first half of the year there were 155.5 million albums sold in the United States, compared to the 2010 when there was 153.9 for the same period.

Granted, it's only a 1% increase, but the music industry is looking for any cause to rejoice at this point. There's more though, according to Nielsen, “digital album sales are up 19 percent through the first six months over 2010 and are on pace to set a new sales record at the end of the year”. More than 660.8 million digital units (meaning songs) were sold in the first half of 2011 as well, an 11 percent increase from the summer of last year.

Now there are a number of interesting points to consider here.

1) It seems that catalog sales have spurred this slight album growth. Catalog is what's always been hit the hardest by the digital revolution, so it's certainly an interesting twist when you see growth in this area.

2) Considering that music in the cloud has begun and consumers are getting used to streaming and subscription, it's hard to believe that any kind of music sales have grown. Of course, the big test is when iCloud launches. Let's see if these numbers hold by the end of the year. Then there's cause for celebration.

3) Spotify hasn't launched yet. The word is that Spotify will launch in the States any day now, and by all accounts, it's a game changer. Add to the fact that they'll be partnering with Facebook so it will be built-in to the social network, and music download sales might actually take a big hit.

All that being said, I predict that music consumption will be higher than ever, and total revenue might climb. Of course, as I've stated in so many previous posts, it looks like the artist will get screwed out of most of this income, at least in the beginning, as most of this new found income goes to the labels. But make no mistake, we're right in the middle of a music business revolution. Feel it. Enjoy it. Make it work for you.

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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 daily discussion of music, recording, and production tips and tricks.