March 24, 2023

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.

Ben Sisario writes about the music industry. Follow @sisario on Twitter.

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SiriusXM’s Alt Nation Becomes a Proving Ground for New Bands

“Radio has traditionally been that game where you say: ‘What’s on the charts? That’s what we play,’ ” he said. “And: ‘What do you play? What’s on the charts!’ ”

But Sirius is satellite radio, which relies on subscriptions rather than advertising, and that gives programmers like Mr. Regan more freedom to take chances on obscure bands than their counterparts in FM radio. SiriusXM has labored in recent years to position itself as a leader in presenting new music.

“We can try things,” Mr. Regan said. “We swing and miss, and that’s fine. At least we were given the opportunity to swing.”

These days Mr. Regan’s batting average is pretty high, several label executives and band managers said. He has played a critical role in the rise of alt-rock success stories like Foster the People and Grouplove; more recently, he jump-started the careers of several groups, among them Atlas Genius, Blondfire and Capital Cities.

“Jeff Regan has had an incredible knack of picking talent and songs and bands for the last few years,” Daniel Glass, the founder of Glassnote Records, said.

As SiriusXM approaches 24 million subscribers, this once-minor player in promoting songs has become a proving ground for new bands, a steppingstone between the Internet and breaking into the rotation at big FM radio stations.

Broadcast radio is still king when it comes to creating stars who can fill arenas and sell 500,000 records or more. Alternative-rock stations like KROQ in Los Angeles and WRFF in Philadelphia continue to have immense sway. There are also a few influential noncommercial stations, like WFUV in New York, with the power to anoint bands.

Some radio analysts say it remains to be seen if Sirius, even with its expanding audience, will ever rival FM radio’s ability to drive music sales.

“It’s not really about how many bands you break,” Fred Jacobs, a media consultant, said. “There are a lot of broadcast stations in small markets that break a lot of bands too, but they don’t reach lots of listeners. You have to look at it in terms of overall reach and impact.”

Still, Sirius appears to be staking a claim to being a tastemaker, especially on channels like Alt Nation and XMU that try to offer the programming of a small noncommercial or college station to a national audience. Some bands say airplay on those channels leads to significantly increased sales and can attract interest from major labels.

Programmers at FM stations have become more conservative about playing unfamiliar bands or new tunes over the last five years, as the tracking systems that determine ratings have become more sensitive, recording, for instance, when a listener switches channels midsong.

At the same time, SiriusXM is becoming more adventurous. “I tell my programmers if they are finding out and discovering music only through record label promotion people, then they are not doing their jobs,” Steve Blatter, Sirius’s senior vice president for music programming, said. “We very strategically are more aggressive than terrestrial radio in the way we identify songs and push them.”

That strategy over the past two years has led to many successful bands’ receiving their first broad exposure. Sirius’s country channel was the first to play Florida Georgia Line’s “Cruise,” which has topped the Billboard Country Songs chart for four weeks. After that early airplay on Sirius, the duo signed a recording contract with Republic Nashville.

Mr. Regan’s Alt Nation channel has also led the pack of FM alt-rock stations in several instances, band managers said. Foster the People’s hit “Pumped Up Kicks” played on SiriusXM’s Alt Nation three months before climbing the rock radio charts. Grouplove, a Los Angeles band on Atlantic Records, enjoyed heavy airplay with its first single, “Colours,” on Alt Nation in March 2011, five months before it broke through on broadcast radio.

“It’s kind of like the biggest alternative station in the country and it’s definitely a test bed for things,” said David Wolter, an executive for artists and repertory at RCA Records. “I certainly keep an eye on their playlist.”

Mr. Regan seems to relish plucking artists from obscurity. One example is Atlas Genius, from Adelaide, Australia, whose song “Trojans” ended up at No. 5 on Billboard’s 2012 year-end alternative-songs chart.

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ArtsBeat: Swift’s ‘Red’ Tops a Million Sales in Week 1

Her products are for sale in a special display at Walgreens stores. She has a line of Keds shoes. She’s all over Target ads. She was even part of a deal at Papa John’s, which dressed countless pizza boxes with a photo of her lipsticked face.

All that branding paid off for Taylor Swift, whose latest album, “Red” (Big Machine), sold 1.208 million copies in its first week out — the biggest weekly take for any album since 2002, Billboard reported on Tuesday night, citing data from Nielsen SoundScan. The album will, naturally, open at No. 1 on Billboard’s new album chart, which will be released in full on Wednesday.

The success of “Red” continues a winning streak for Ms. Swift, 22. Her last record, “Speak Now,” opened with just over 1 million sales two years ago, and she is the only woman to have two albums selling a million copies in one week since 1991, when SoundScan began keeping tracking sales from music retailers. Only 18 albums, counting “Red,” have sold a million in one week, and even in this era of depressed music sales, a bunch have happened recently: Lady Gaga’s “Born This Way” hit the mark last year, “Speak Now” in 2010 and Lil Wayne’s “Tha Carter III” in 2008.

In its report, Billboard noted that 465,000 sales of the album were made at iTunes, 396,000 at Target and 8,000 through Papa John’s, which sold the CD for $13 and also as part of a $22 pizza-and-CD combo. (“I don’t think it would look right on a hamburger or a taco, but it sure looks right on a Papa John’s box,” the chain’s founder, John Schnatter, said of the deal.)

One outlet where fans could not get “Red,” however, was Spotify. As other record companies have done with some major new releases, Ms. Swift’s label, Big Machine, withheld the album from the subscription streaming services like Spotify and Rdio. Some labels believe that doing so will spur download sales, or at least not cannibalize them — in the all-important first sales week.

But recently another big-selling album challenged that assumption: Mumford Sons’ “Babel” opened at No. 1 with 600,000 sales in its first week — including both CDs and album downloads — while also being available on Spotify, where it was streamed eight million times in its first week, a record for the service.

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