Media Decoder Blog: History Shadows an Upbeat Music Sales Forecast

In early 2004, Billboard magazine ran a cover story with a hopeful headline: “Have Sales Finally Hit Bottom?”

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The answer, as anyone who has paid attention to the music industry knows, was a most definite no. Aside from a couple of positive blips along the way, the recorded music business — shaken by digital media, the Internet and the loss of thousands of record stores — has been in precipitous decline for more than a decade.

So for those who have seen the industry’s optimism dashed before, an upbeat report on Tuesday by its global trade body, the International Federation for the Phonographic Industry brought hope and skepticism. According to the report, the trade (or wholesale) value of global recorded music sales in 2012 was $16.5 billion, up 0.3 percent from the year before, the international market’s first year-over-year gain since 1999.

Digital music was responsible for much of that growth, such as it is. In developed markets like the United States, people are buying more digital files and starting to subscribe in significant numbers to streaming services like Spotify. (They are also getting less and less music through unauthorized peer-to-peer networks, according to another report on Tuesday by the NPD Group, a consumer-research firm.) These services are also rapidly spreading overseas. “Major” ones like iTunes, Spotify and Deezer are now available in more than 100 countries, up from 23 just two years ago, according to the I.F.P.I., while some countries, like Kenya and Vietnam, saw their first digital music services open last year.

“Digital is saving music,” said Edgar Berger, Sony Music’s international chief.

Those trends are all positive, and if they continue they could allow the music industry to earn money in areas once thought completely spoiled by piracy. But despite this good news, there are still some possible problems, as well as questions about how the new digital economy will work.

One issue is the future of of CDs, which still represent the majority of sales (and industry revenue) around the world; in Japan, for example, the world’s second-largest music market, CD sales are actually growing. But these are under threat from the loss of stores like the HMV chain in Britain, which recently entered bankruptcy proceedings, and from shrinking shelf space at brick-and-mortar stores everywhere.

And while the I.F.P.I.’s report trumpets Sweden, Norway and India as exemplary digital markets, it is unclear what the rest of the world could learn from them. India’s legitimate music sales are a tiny fraction of its overall entertainment spending, in large part because of piracy, and as Glenn Peoples at Billboard has pointed out, Norway’s population is about the size of Kentucky’s.

The popularity of digital music services itself poses some difficulties. In the United States, rising competition and thin operating margins could force subscription services to reduce their prices from the current standard of about $10 a month; according to some reports, Spotify may already be pushing for this in its latest round of label negotiations. Lower prices could help these services attract millions of new customers, but they would likely also further reduce royalties, an issue that has drawn serious concern among artists and their advocates.

So what does it mean to “save” the music industry? Few expect the business to ever return to the salad days of 1999, when worldwide trade revenue was about $29 billion, and the world had just seen the arrival of the peer-to-peer system Napster. Many artists have long since adapted to the idea that recordings will no longer be their biggest source of income, even if they may be the foundation around which the artists build a more diversified career.

For the record industry, it may be too soon to declare victory. But the I.F.P.I.’s report, along with other data and analysis, make a decent argument that the bleeding has at least been stanched. The industry’s challenge is to expand digital services more quickly and more profitably than the rate at which CD sales die out, and it looks as though that has finally been achieved.

Yet another report on Tuesday gave a glimpse of how success might look. The report, by the British media research firm Enders Analysis, had a rosy title: “U.S. Recorded Music Gets Some Mojo.” It said that music sales “touched bottom” last year and projected that retail sales in the United States, estimated at $5.3 billion last year, would reach $5.7 billion by 2016, a growth of 7.5 percent over four years.

That may be billions less than the industry was making at its peak. But at least it is not less than it makes now.

Article source: http://mediadecoder.blogs.nytimes.com/2013/02/27/history-shadows-an-upbeat-music-sales-forecast/?partner=rss&emc=rss