Digital Music Sales Continue to Overtake Physical Music Sales

Apple announced a few days ago that iTunes has just overtaken Best Buy in music sales, so is now the second largest music retailer in the US after Walmart. This continues the strong growth they've been experiencing since their launch in 2003.

According to their press release, there are now over 50 million iTunes customers, who combined have purchased more than 4 billion songs. Thats including the 20 million songs iTunes sold on Christmas day 2007!

I think this confirms what most of us already know, that the music industry is undergoing a huge shift in how it works, both now and in the future. And of course it's not just us noticing the rather startling transformation. The music industry has been grappling with the trends for some time now, through strong arm tactics, and through experimenting with largely DRM protected digital distribution.

However the primary music industry players are beginning to agree that changing with the times is what's needed to keep up with what music fans around the World are demanding from their music listening/purchasing options.

At around the same time that iTunes was announcing their record digital sales, over 500 top music industry executives were meeting in New York to discuss the state of things, and strategies for the future. General consensus has clearly shifted even amongst some of these former hardliners, as was shown in some of the main discussions:

• DRM on purchased music is dead
• A utility pricing model or flat-rate fee for music might be the way to go
• Ad-supported streaming music sites like iMeem are legitimate players
• Indie music accounts for upwards of 30 percent of music sales
• Napster isn't losing $70 million per quarter (and is breaking even)
• The music business is a bastion of creativity and experimentation

(read more about the music industry conference) .

This is another interesting article on the options for the music industry that I stumbled across while writing up this blog post. Covers some very good points on how fundamental the shift has been and will continue to be.

Also worth noting is yet another established group, NIN, releasing their latest album, Ghosts, in an alternative manner. You can download the entire 1st CDs worth of songs as 320kbit MP3s for free, or pay $5 for the entire 4CD album release as a digital download - or there are more expensive physical collectors editions available ranging up to several hundred dollars.

I'll be interested to hear how that goes for them, after the massive success that Radiohead had recently when they released their album In Rainbows on their website as 160kbps MP3s, with a totally visitor chosen pricetag. Apparently about a million fans downloaded the album in the first month, 40% of whom chose to pay for the download - paying an average of $6 each. After costs that worked out around $3million in takings in one month. They then followed that up after a few months with a physical box set CD release, and removed the download as part of that second phase of the album release.

I think over the rest of 2008 and beyond we'll be seeing more and more of even the traditional music industry companies moving into these creative modes of digital music distribution, and most probably the emergence of new methods of getting customers to pay for new music, without suing them for downloading, or further alienating the general population - their own customers.