Thursday, January 5, 2012

Break It Down. Music Sales in 2011

Soundscan released their 2011 numbers for music sales. As we saw earlier, the first two quarters of the year saw a boom in music purchases and although sales lost some of their momentum during the last half of the year, 2011 was the first year since 2004 to see growth in album purchases from the previous year.

Before we go through the numbers, it is worth restating that TMD is primarily written for musicians and listeners of smaller genre categories. Independent music. As we will see, the major labels always claim the top prizes and determine the direction that the rest of us follow, if we can. A big IF.

The Good News: Barely
The good news is that album sales in the US grew a whooping 1.3%. Not much, but better than the landslide that has been happening for most of the 2000’s.

As always, the main forces behind these numbers are due to a handful of albums. This year there were only 13 albums that sold 1 million units or more. Led by Adele’s “21”. Those 13 albums make up only 0.0169% of the 78,875 newly released albums Soundscan counted for 2011. So for Independent musicians the story is pretty much the same. Only artists on labels can make it big, and realistically, even for those artists, the odds are still slim to none.

This percentage of top selling artists seems eerily similar to the amount of super, super rich people in the US.

It should be noted that Adele is on a small label, XL Recordings, whose list of artists include The White Stripes, Radiohead, Gil Scott-Heron and Sigur Rós. The term “small” being relative. Nevertheless, Adele's "21" seems to have been the main engine for increased sales in 2011.

The other interesting thing in these numbers is that the #2 best selling album of the year was Michael Bublé’s Christmas album. It reached that spot with only three months worth of sales. Some analysts have speculated that many of these were bought as gifts and people don’t like to give, or get, a digital file as a gift. Perhaps... I would suggest that more likely the demographic of his audience are not big iTunes users. That is to say they are older.

Lastly, 2011 was the first full year since the widely popular, but illegal site, Limewire was driven out of business by the courts. Illegal downloads dropped almost 20% when the site was shut down. This gap may have convinced some people to go legit to make music purchases. (Piracy continues to be a major problem and the debate over how to deal with it has gotten nasty, and remains unsolved.)

The Mixed News: Disemboweling the Music
As we noted in the post The Digital Domain: 1's and 0's or just zeros? many people are disemboweling albums by purchasing only a few songs. Cherry Picking. This is so common that the purchase of 10 individual tracks is now call a “Track Equivalent Album", or TEA. 1 2011 marks the first year when the combination of digital albums and TEA sales passed the 50% mark of total sales. 50.3% to be precise.

However, when music buyers decide to buy an album in its entirety, the majority still purchased that album as a physical CD. Yes, the shinny discs! If fact, 68.7% of album sales in 2011 were CDs! This is similar, albeit weaker, to what happened in the UK in 2011 where, according to BPI, the main British PRO, 76.1% of total music sales were CDs.

Geoff Taylor, the chief executive of the BPI, said that "Digital developments grab the headlines, but the CD remains hugely popular with consumers, accounting for three-quarters of album sales.

"Physical ownership is important to many fans and the CD will be a key element of the market for years to come."

Let's hope he is right.

That said, CD sales still fell 5.7%, but this is a major gain from the 18-20% losses that have been happening each year for the last four to five years. Many analysts are saying that the music business has turned a corner. That would seem to be premature given the volatile nature of the changes brought about by digitizing music for the consumer.

The Bad News: Lambs or Lemmings?
Part of why over all CD sales improved is that the major labels began heavily discounting their catalog (Older recordings). Many big box stores like Wal-Mart, Target and others sold CDs for as little as $5.99. This is a perfect example of the major labels heading off in a direction that the rest of us can’t afford to follow.

If you are a large label with a catalog of thousand of recordings you can make up the extremely discounted price through quantity. However if you are a Indie musician with, at most, a half dozen recordings, there is no way you could make a living wage selling your CDs so low. (Some executives at the major labels even questioned this practice, where it was heading and how small the margin at these prices is, even for the majors.)

Similar to the 13 best selling titles of this year, only a relative handful of albums sell enough to cover the such a low price. And we would guess most of these albums were the top sellers of their time.

Another way that the big labels are heading in a direction that the rest of us can’t follow is streaming, especially with Spotify. All the major labels are investment partners in Spotify, allowing them to make money from revenue that artists, whether signed to a label or independent, can not. This would include money from ad revenue and subscriptions. Spotify doesn’t pay “per-stream”, so they can parcel out payments anyway they see fit. However, the artists are stuck with the “average” payments of $0.0033 to $0.0013 per stream.

Getting back to Soundscan’s numbers, is worth noting that, as we have mentioned in previous posts, smaller genres don’t really measure up to the most popular ones. In fact while rock was up 1.9%, R&B, country, latin, christian/gospel all declined. Hidden inside the 4.2% decline of R&B is rap, which grew 3.3%. Other hidden numbers, jazz grew a whooping 26.1% Why jazz? Because Michael Bublé’s Christmas album was put in that genre.

The bottom line is that over all this is good news. But there are still a lot of issues out there that need to be addressed, especially for independent musicians: low payments; making a living; productions costs; the cost of touring and promotion; the rising cost of living; pirates, sharks, and Google; illegal copies; dealing with DMCA takedowns and a lack of basic information for the listening public.

1. TMD likes tea, but we don't like TEA...


  1. "78,875 newly released albums Soundscan counted for 2011"

    That really popped out at me. That's A LOT of music being made for an apparently dying industry. It's not just that the pie is shrinking but it is being cut into too many pieces. Maybe not everyone deserves to make a living making music?

    If I could trade my boring office job for touring and playing instruments I would, but is it could for society and the economy if I did that? Probably not.

  2. Who's to say your "boring office job" is good for the economy? More to the point, would you have accepted the job if you knew you could never even begin to support yourself on its salary?

    The production, marketing and selling of my music helps employ hundreds of people in the music business, the PR business, the distribution business and retail businesses, both brick & mortar and online. It also pays my mortgage, buys food and other supplies and necessities.

    This money is then passed on by these people and business to pay others for their work, and it continues to ripple down the economy.

    I've sold over 100,000 copies of my CDs and the money from those sales does not just disappear. Most of the time I see only a fraction of it. The bulk of it going to the retailers and distributors who chose to sell it because it does sell. All of this generates money that is helping the economy.

    As for your question about whether your music would be good for the economy or not? The only person stopping us from knowing the answer to that is you.

  3. Not to mention of the "78,875 newly released albums Soundscan counted for 2011"
    Over 80% of those sold less-than 10 copies...
    (ie, there's alot of hobbyist counted in those numbers. Not that hobbyists releasing records is necessarily a bad thing, just you need to take that into account)

    I'd count the overall sales number off all songs to get a sense of how things are (and those are down by a very big percentage). Even superstars like Gaga-- sold about 1/5th the amount of someone like Alanis Morsette did in the 90's. Piracy being the biggest factor of the music industrys' decline.

  4. You make a good observation. As I wrote in the post Omnia Vanitas, The new Gate Keepers "A study conducted by PRS for Music, a nonprofit royalty collection agency, discovered that of the 13 million song available online for purchase, 10 million, or 77%, never found a single buyer" and went on to state that 85% of albums are never purchased even once.

    This is another reason why I don't believe the hype about streaming services being good for music discovery. How does a potential "fan" find your music out of 78,875 new albums. Not to mention the one from previous years?

    In addition to piracy I would add illegal copies, made by people for their friends. While the intent of this may not be the same as a true "pirate", it still has a negative impact on music sales.

  5. TMD wrote: In addition to piracy I would add illegal copies, made by people for their friends. While the intent of this may not be the same as a true "pirate", it still has a negative impact on music sales.

    Absolutely. But, at the same time...
    if that were the extent of the issue, I would [we all would] be a happy camper.
    person-to-person physically handing someone a copy is a drop of water -|||- Internet piracy is a Tsunami!

  6. That is most likely the case. It would be good to see stats about person-to-person copying before calling it a drop of water. I think it depends upon an artist's fan base.

    That said, keep in mind the larger question regarding the statement you quoted, which is "how much influence does TMD has over piracy and policy combating it?" None, would be my guess.

    One of the main points of the TMD mission statement is to inform music listeners that making copies of CDs (or digital songs or albums) hurts artists. I have found that there are many people who just don't realize this, much less even think about it.

    As I have written in other posts, I have had fans come up and tell me that they are doing me the "favor" of promoting my music to all their friends. How? It turns out they have been ripping copies of my albums and giving them to their friends. One person had made so many copies that he had given out the equivalent of over $200 worth of (lost) sales. Trust me, that did not make me a "happy camper". If my own hardcore fans don't get it how actions like that hurt me and my ability to make that next album they keep asking about, how will someone who just casually listens to my music ever understand?

    Don't get me wrong, I love it when my fans share their enthusiasm for my music and let others hear it. But making friends and family members (illegal) copies does not help me.

    Would I like to see large scale pirates shut down? Of course. Do I think the DMCA was DOA? Very much. But I believe that to win these battles content creators (artists, musicians, writers, journalists, film makers, etc.) need to win the hearts and minds of their fans. We need to inform them just how much time, preparation, sweat equity and money goes into a creative work. Even if that work ends up being delivered digitally.

    In the end people are motivated by emotion. Greed being one of the strongest, but so is the desire to "do the right thing", call it what you will. (This has been the backbone of civilization for thousands of years. Living by some form of the Rule of Law.)

    TMD's goal is to reach as many of the hearts and minds of people who appreciate music and believe that music, even in the digital age, still has the same value it always had. Hopefully they will not make or accept so-called "shared" copies of music, and not visit and patronize pirate sites. And maybe, even tell their friends how they feel, and, perhaps, even their representatives, who might be voting on something like SOPA or Protect IP, that we need to enforce copyright laws and write new ones with teeth to combat piracy.

  7. I hear you.

    A large part of the disconnect comes from people thinking that since it didn't 'cost' them anything (that they can immediately see) to make the copy, or that digital formats distribution costs are so low, that the product itself has no value.

    Quite simply, they confuse the product with the container.

  8. Not to mention of the "78,875 newly released albums Soundscan counted for 2011"
    Over 80% of those sold less-than 10 copies...
    (ie, there's alot of hobbyist counted in those numbers. Not that hobbyists releasing records is necessarily a bad thing, just you need to take that into account)

    What is the fundamental difference between a "hobbyist" and a "professional" other than the fact that a professional may have more success selling albums? It seems to me everyone "hobbyist" and "professional" wants to make money, otherwise they wouldn't be selling their albums. Everyone is trying to compete for album sales.

    If something like 77% of all music is NEVER purchased at all, that is a problem other than piracy. How can your album be pirated if not a single person purchased it?

  9. Before we get into this, if you really, truly don't know the difference between a professional and a hobbyist the I suggest you look those terms up on Wikipedia, unless they are dark again. This time because they are cashing their "donation" check from Google.

    With that out of the way, as a "professional" musician, I have spoken with a lot of people who would say they are "hobbyists". They have other sources of income. Usually a "day job", sometimes they are retired and even less they are "trust-fund-babies". They are doing it for fun and can choose to stop at anytime without it affecting their income generating potential. All of the hobbyists I've talked to do not need to make any money from their recordings, and the majority of those don't even care. They do it for fun.

    Unlike a hobbyist, I earn ALL of my income from creating and performing music. Professional musicians have to make enough money from their music to pay their mortgage, buy food and all the same bills everyone has, plus the money needed to keep making music. Professional musicians not only make music for fun, but approach it with a seriousness and level of dedication that "hobbyists" generally do not. (For example I never met a hobbyist who practices hours a day, every day. Something Pros regularly do.)

    This seriousness, long term dedication and commitment are needed to reach the level of being a professional. This is before you find out if anyone likes your stuff. This is true not only for musicians, but writers, film makers, editors, designers and all other creative fields.

    That said, many of the hobbyists still succumb to vanity and pay money to CD Baby, Tunecore or any of the other gate keepers that are more than will to put anyone's stuff on iTunes and other sites. Just pay up, that's really all they care about. This is what leads to there being 78,875 new albums released last year.

    (I find it interesting that of all the information in this post, the 78,875 is what everyone has become fixated on.)

    You asked how something that has never been sold can be stolen. These two concepts are not mutually exclusive.

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