Digital Downloads Have Music Sales Up, Despite Decrease In Album Sales

by: Barry Ritholtz

The transition to digital continues apace, as the same trends we have been following for the past 5 years are still in effect. The AP reported:

"U.S. album sales continued to decline in 2006, down nearly 5 percent from the previous year, but total music sales were up thanks to a huge increase in digital downloads.

Year-end sales figures released Thursday by Nielsen SoundScan said 588.2 million albums were sold in 2006 -- a 4.9 percent decline from 2005. But digital track sales increased by 65 percent over the previous year, with 582 million tracks sold, and digital album sales more than doubled, with nearly 33 million sold last year."

It appears that sales of digital singles are still gaining in a big way, as sales of (physical) CDs continue dropping. Perhaps there may be some positive elements to the overall data:

"Consumers made nearly 1.2 billion music purchases in 2006, up 19.4 percent from just over 1 billion in 2006, according to the company's data, which is based on point-of-sales tracking. That increase comes even as sales have dropped 4.9 percent of albums, whether by digital download or on CD and other formats that you can actually hold in your hands. Overall, the industry sold 588.2 million albums in 2006."

Terrestrial Radio was the prior centralized method of promoting album sales. My argument has long been that terrestrial radio abandoned their listeners, and they have now lost one -- perhaps even two -- generations of music fans. Recapturing those ears will be extremely difficult, if not impossible.

Its no surprise that as radio has self-immolated, album sales continue to falter.

Meanwhile, legal outlets for digital music continue to expand: Google's (NASDAQ:GOOG) YouTube, Apple's (NASDAQ:AAPL) iTunes Music Store, News Corp.'s (NASDAQ:NWS) MySpace, and Satellite Radio [Sirius (NASDAQ:SIRI) and XM (XMSR)], amongst others. I also stream non-commercial radio: WFUV, NPR, and my favorite, BBC 2. Is it any surprise that just a click or two away, listeners download a track or three?

love_2I find more music via non-radio outlets than I have via radio in years. Perfect example: Have a listen to this BBC show on The Beatles new remix/mash up, 'Love'.

I'm old school, and find many lossless compressions not all that lossless. So I may just have to click over to Amazon (NASDAQ:AMZN) and order the Beatle's Love in Audio DVD in 5.1 surround sound . . .