Digital Economics: We're All Deadheads Now
"Atlantic, a unit of Warner Music Group, says it has reached a milestone that no other major record label has hit: more than half of its music sales in the United States are now from digital products, like downloads on iTunes and ring tones for cellphones." Digital sales make up a smaller share of total revenue at other labels. Meanwhile, the overall trend is unfriendly:
With the milestone comes a sobering reality already familiar to newspapers and television producers. While digital delivery is becoming a bigger slice of the pie, the overall pie is shrinking fast. Analysts at Forrester Research estimate that music sales in the United States will decline to $9.2 billion in 2013, from $10.1 billion this year. That compares with $14.6 billion in 1999, according to the Recording Industry Association of America.
As a result, the hope that digital revenue will eventually compensate for declining sales of CDs -- and usher in overall growth -- have largely been dashed. A million years ago (actually, 1987) a colleague and I wrote an article for Forbes on the reinvigorated music industry, which was selling a ton of catalog material in the then-new CD format.
A sidebar to that article told the now-familiar story of the Grateful Dead's strategy of giving away music and making money as a live act. That approach was later hailed as a precursor of net economics for software; now it looks like its circled back to the music industry itself.