If you want to hear more about the eMusic saga from the company itself, they’ve started a new blog called 17 dots. (For more, see their defense to Ars Technica. Their argument remains simple: people want to pay less for music. Sales are declining; eMusic is the cure. Hypebot has some terrific coverage of the saga of label departures and what it might mean for eMusic. The short story, though eMusic says the departures are amicable, is that a few key labels have left (Victory, Ultra Indie), others are thought to be on the way out (Red House, Silva America, Tzadik), and others are rumored to be leaving. There’s really not a max exodus yet, as some reports might have you believe; the issue seems to be that labels are unhappy at the (distant) #2 online music store.

There are far better people than me to analyze sales data, and if you’ve seen anything intelligent, please send it along. But I think the most important question for musicians to ask is what the underlying trends mean. And there are quite a few unanswered questions about sales in general. You can read the record industry’s market data at the RIAA site. Here’s what I notice people haven’t been asking:

Why talk about the “decline” of music sales while ignoring online sales growth? eMusic and many other pundits point to stats that show consistent double-digit declines in music sales. Interestingly, the numbers look different when you figure in onlinegrowth. Take 2005 – 2006 mid-year. Total physical sales dropped by a whopping year-to-year 15%. That’s an incredible number. But figure in digital growth, which included an even more impressive 86% growth (and 112% growth in digital albums, which actually outgrew digital singles), and the year-to-year drop is only 6.1%. Year-to-year losses of 6% are not a good thing. But that says to me people aren’t buying “less music” so much as the industry isn’t transitioning from one medium to another. Online isn’t growing fast enough to account for the speed of physical sales’ decline. The latter has much more complex sources, including the management of the retail outlets themselves and the fact that the industry was actually producing and shipping less music. If digital growth can’t make up for physical sales, in fact, the solution actually seems to lie in better positioning the physical sales for the digital market.

Ironically, eMusic could be a part of the new growth, but their volume-only approach makes the assumption that losses are based on price alone. What eMusic doesn’t point out is that they’re dwarfed by the #1 online music store, iTunes. iTunes customers seem to feel that $10 an album is appropriate, or they would be the larger part of 112% album growth. (Note that, while I personally like subscription services, they’re a tiny portion of sales compared to iTunes, which could help explain why Apple is in no rush to add subscriptions.)

In fact, eMusic more effectively makes the argument that CDs are too expensive, not online purchases.

No one is talking about the 1990s. We live in a world that seems to have lost the ability to see earlier than the year 2000. Blame blogs. But if you look just before the big drop in US record sales in the 2000s, what you see is extraordinary growth in album sales through the late 90s — growth that might not have been sustainable even without the shift to online distribution. In fact, while sales are indeed declining, they’re not out of line with sales in the early 90s, before the explosive growth raised expectations of the record industry. If you really wanted to analyze the current decline, you’d also need to fully understand why that growth happened and why it wasn’t sustained. You might also ask, how could you recreate that kind of growth with online sales? (Or, for that matter, maybe that question is already answered in the 80-115% growth of online purchases, and the question is how to maintain that growth rate?)

I keep bringing these issues up, though, because I think independent musicians actually have more options than record labels. We also have more to lose. You hear a lot about the music industry, and not so much about the musician industry. We haven’t been hurt nearly as badly by declining CD sales as we have by disappearing live music venues and dwindling live audiences. Take specific genres like classical and jazz, and things get far worse. (One area of growth, incidentally, represented by some readers of this site: “worship”, largely Christian.) And, in the US, I think issues like rising health care costs have had more of a financial impact than single-digit year-to-year retail music sales declines.

The challenges are more daunting, but on a small scale, the solutions can be easier. The question isn’t what consumers in general will pay for music. It’s what your fans will pay for music. The question isn’t the margins and volume growth the industry needs to be successful. It’s what you personally need to support your own music making. When you look at it from a musician’s perspective, and consider massive sales growth online, the way everyone else is looking at the music business seems painfully myopic.

  • velocipede

    I think one of the key points is that more people are buying fewer tracks, but at higher prices on iTunes. If as many people subscribed to eMusic as use iTunes, then they would be spending more money individually and aggregately. But, the income would be spread among more artists and labels because each track is cheaper.

    It will be interesting to see if more labels are dissatisfied and leave. They should continue to do what they think is in their own best interest. (I do wonder, though, if some artists will lose income as a result of their labels pulling out of eMusic.)

  • D

    Good comments, Peter.

    The thing that I found important in what Dave Pakman was saying is that we should look at music purchases in the context of overall entertainment spending. Sure, we spent more on music in the 90s and before then, but we didn't spend anywhere near as much on things like broadband, DVDs, games. Your point on health care is an interesting one that dovetails with what he's saying.

    It's also key to remember how few songs iTunes users really buy. Whereas on eMusic, you're going to download more by default to get your money's worth. I have the perception that eMusic users buy albums more frequently than iTunes people, but I have nothing to back that up (other than my mind boggling at the prospect of hunting down 90 single tracks to download per month)

    The other thing to keep in mind is that digital download services have to compete with free. This was something Steve Jobs was talking about when they first introduced the iTunes store. To me personally, eMusic does a much better job at that than iTunes.

    Finally, one little point: it's worth mentioning for those unfamiliar with it that unlike most subscription services, eMusic tracks are DRM-free and while you get a set number of track downloads a month, you keep the tracks. They don't expire if you stop paying.

  • I agree, D, and this saturation of overall spending is a huge issue. In fact, I'm not convinced $10 is a good price point; maybe eMusic really does have the right idea. I just still feel as though we're having this discussion in a vacuum, without the kind of numbers that would make pricing decisions clearer. And it's still not clear what eMusic's model actually translates to for labels. We have a debate going between people like Pakman, the NY Times running an Op-Ed by a couple of former (failed) record owners who now end online … where are the numbers on specific labels? Specific musicians? Better variables on the consumers? Some of this may well be out there in the form of proprietary data, of course. But that's why I'd be even more interested, even just anecdotally, to see how you could experiment with alternative price points.

    It's funny when you look at the subscription services, too, because they really wind up being absurdly cheap. You can't take your URGE music with you when you cancel, for instance, but at $15/mo, maybe you don't care. It's like having a radio subscription but with on-demand tracks. I certainly find that a better deal than most cable TV in terms of value for me, DRM or no. But then I wonder about musicians … bringing us back to the eMusic question. (And theoretically, it would *seem* like URGE subscriptions would be *worse* for a label than eMusic, not better.)

    If anyone runs across some better data, I'd love to see it. RIAA's 10-mile view isn't all that helpful as far as underlying trends.

  • This isn't off topic, but perhaps parallel. Did any of you read the article a few weeks back in the NYT about the Farm Bill and how the government subsidizes certain things and how maybe that isn't good for our health or the land?

    I know that sounds off topic but it seems to me there's something of an analogy here to what you're talking about Peter. Taking in the whole system. You're right about all the talk about music industry but not so much talk about musician industry.

    If we had some solid numbers I bet I could cook us up a few charts all Tufte style that would make something clearer.

    The guys who sell online that I talk to say they pretty much don't make anything off iTunes. The articles linked to this thread seem to support that hypothesis. If that's true then why leave eMusic to go after iTunes-style returns (i.e. not that much/nothing)?

    It seems normal/appropriate that eMusic is looking after their clients (buyers of music who want cheap music that's interesting). Just like most restaurant owners would be more interested in serving inexpensive tasty meals to eaters than providing a solid living to farmers.

    Keep going after this topic Peter. It's some of the most open-headed commentary on the topic I've seen since the Pho days.