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Apple Drives Music Sales While Overall Market Declines

Due in part to the iTunes Music Store, digital music sales tripled in the first half of 2005, despite a global drop of 1.9 percent in general music sales, according to the International Federation of the Phonographic Industry. Digital sales now account for 6 percent of the music market, estimated at US$790 million, and represent the majority of singles sold worldwide.

Music labels attribute the weaker general market to dropping CD sales and piracy. Thanks to the continuing decline in sales of CDs, they are pushing for Apple and other music sales and subscription services to raise rates in an effort to generate more revenue. Apple maintains that the current flat-rate system is best, while the labels want a sliding scale based on song popularity.

The looming showdown does not bode well for the music labels. The iTunes sales model has proven itself , and is very popular. Changing that now could erode digital sales, which would be akin to the music industry shooting itself in the foot.

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DaiMac said:

member since 29 Jun 2001 with 952 posts, unranked, send him a message or view his profile

The reality is that the main reason digital music services are the main source of single song sales is that the labels no longer ship the majority of singles to retailers. There are certainly exceptions, but for the most part single CDs are a thing of the past. Until very recently I worked at a very large music chain store and I recall one 6th month period last year where only 2 new singles were added to our top ten singles rack, and 1 of those was a relatively unknown country artist.

I think thats also the real reason that the labels are readying for a dust-up with Apple, they want to lock consumers into buying whole albums, preferably for $14 or more, instead of giving them the freedom to buy individual tracks. The rationale is very simple: the majority of major artist cds contain 10-16 tracks, and of those perhaps 3 will be singles. To the average fan of music, people who aren't heavily devoted to an artist (or if the artist is brand new) that means you are effectively paying $14 (often more) for 1-3 songs.

A good example of this would be J-Kwon's 2004 CD, "Hood Hop". It featured a single, Tipsy, that did well on the radio and with mainstream hip hop fans in the club, and drove demand for the album leading up to its release, since the single was not widely available (I note its listed as an import on Amazon). When the album was released, however, it had horrid sales because a combination of word of mouth and piracy let people know that the rest of the CD was ridiculously bad.

I've said it before and I'll say it again: the days of the conventional record label are numbered and they know it. They try to justify their existence by claiming to manage promotional and distribution aspects of the music business that artists don't want to deal with, but even the most enthusiastic label reps know that argument is BS. With electronic distribution that is so damn easy, and the p2p networks as the ultimate tool for promotion and dissemination of a band's sound, they are redundant if not irrelevant. I would say thats the real reason they are so fiercely anti-P2P, they see the face of their successors in it.

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