News - 27/10/2014

iTunes music sales to shrink by 13 to 14% in 2014

iTunes music sales to shrink by 13 to 14% in 2014


iTunes music sales have taken a beating in 2014 and, according to the Wall Street Journal, will decline by 13 to 14% on a worldwide basis.

These figures are remarkably close to those reported by Nielsen Soundscan a few weeks ago, which showed a 12.9% decline in digital track sales during the first 9 months of 2014 in the USA.

The WSJ figures are surprising because they show that the impact of streaming is not just making a dent in more “progressive” digital markets like the US or the UK, but it is significantly affecting sales worldwide.

The decline also serves as a good explanation as to why Apple, during the first half of 2014, hurriedly decided to purchase Beats Music. The company is apparently working on how to integrate the subscription service within iTunes for a launch in early 2015.

Apple didn’t believe in streaming and its "leap" into the space was with iTunes Radio, a product that works well but failed to reignite the downloads flame (the service stressed how easy it was to instantly buy a track that was playing on the radio).

Apple has an advantage when it comes to long-standing downloads customers: it knows what music they purchased on iTunes and could feasibly re-create their library within a subscription service. This would introduce a level of familiarity which other services lacked and which left many users with the “search box anxiety” that analysts pinpoint as the one key problem streaming needs to help users overcome.

While Apple, with its tens of billions of dollars in cash and its stock reaching a record high, won’t be too concerned by the impact of that decline on its revenues, the recorded music industry will be affected in a big way. The decline in downloads is seemingly much faster than the increase in revenues derived from streaming - just like a few years ago when the decline in CD sales was too fast for downloads to close the gap - so it looks like the industry as a whole may be heading towards another downturn. There is a silver lining, in that if premium streaming services were to become a mainstream mode of consumption they could actually increase the overall market, but the latest rumours around Apple pushing for a lower price point also show that the current streaming model could change and so could the revenues derived from it.


(Andrea Leonelli)

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