Music Sales Are Growing For the First Time This Century: Here's Why
Global music sales rose by 0.3 percent to $16.5 billion in 2012. While decimal growth is not typically a respectable cause for jubilee, this marks the first good year for the industry since 1999. Music's 21st-century renaissance boils down to four factors: Better mobile technology, a growing global middle class, more music-listening options, and an effective crackdown on piracy that is making paid music a more attractive option.
Perhaps this was a dead-cat bounce for an industry flayed by Napster, BitTorrent, and other file-sharing programs. But here's the case that music's comeback is for real -- with help from the IFPI Digital Music Report.
MUSIC GROWING EVERYWHERE (EXCEPT IN AMERICA)
Digital music (which accounts for about 1/3 of global music sales, and more than 1/2 of U.S. sales) aren't just rising. They're accelerating. Downloads, subscriptions and ad-supported music sales all growing. Online sales are following on the heels of smartphone penetration growth around the world. All good news there, but at least half of the top 20 markets aren't growing. Chief among them: the United States, where music sales are still falling.
SUBSCRIPTIONS vs. DOWNLOADS AROUND THE WORLD
When Napster debuted, there was no iTunes, no YouTube, and no Spotify. But in the last 13 years, the market for paid downloads, ad-supported music, and subscription services has blossomed. Subscription services alone have grown 44 percent since 2011.
Different countries have different ways of getting to Internet songs. More Swedish people are familiar with Spotify (96%) than Americans are familiar with iTunes (84%), whereas French use the subscription service Deezer, which I have never heard of.
LISTENING IN OUR OWN LANGUAGE
The music market is global. But popular music is still local. Even though all of the top ten global albums and nine of the top ten global singles of 2012 were in English, Europeans still seem to prefer songs in their own languages. More than 60 percent of the top albums in key European countries were artists from that country.
THE PIRATES ARE LOSING
The last decade in the music industry has been a classic lesson in microeconomics. When the supply of digital music exploded with Napster, the price of songs dropped to zero and the music industry collapsed. As the government cracked down on file-sharing sites, the cost (and risk) of downloading illegally rose, and more consumers have shifted to legal downloads and subscriptions. 2012 was a banner year in crackdowns, with the FBI shutting down the top cyberlocker company Megaupload and big BitTorrent sites like BTJunkie.
Megaupload alone generated $175 million in revenues. That's half of global digital music growth between 2010 and 2011. Last year, cyberlocker use has fallen 18 percent. The black market for music is still enormous. But it's shrinking fast while the options for legal music (and the number of devices to play that music on) are growing.