With 2013 now behind us we are beginning to see the first full year sales numbers come in for 2013 and the long anticipated ability to assess the impact of streaming on the market. Until the IFPI annual revenue numbers come out we are mainly constrained to volume data which only paints half of the picture. This is especially true for streaming given the massive difference in revenue per stream for free versus paid, YouTube versus Spotify etc. But even within these constraints we have enough to start establishing a view, one that indicates the headline story may be more about transition than it is growth.
Nielsen’s numbers for the US show that digital track sales were down 5.7% and that digital albums were down 0.1% while albums as a whole were down 8.4%. In the UK the BPI reported that digital track sales were down 4.2% though digital albums were up 6.8%. Nielsen also reported a 103% rise in audio streams. Let’s assume that a significant portion of those increased streams will be coming from free users and that the impact on streaming revenue growth will therefore be around the 65% mark. That would translate into total US music market revenue growth of just under 1%, though if free usage is a bigger part of the picture then growth could be negative.
It is important to understand the appropriate context for the shift to streaming: it is fundamentally a transition of spending. Just as the download was a transition from the CD so streaming subscriptions are a transition from the download. This is because the majority of subscribers were already digital music buyers before becoming subscribers and the majority of those were iTunes customers. 50% of subscribers buy album downloads every month and 26% buy CDs every month (see figure). On the one hand this can be interpreted as the fantastic capacity of streaming to drive discovery and music purchasing. There is some truth in this, but it is an inherently temporary state of affairs. If streaming services do their job well enough there should be little or no reason for a subscriber to additionally buy music. They do so because consumers transition behavior gradually not suddenly. The fact that a third of download buyers still buy CDs illustrates the point.