Tag Archives: record labels

Online Music Sales Will Top CD Sales By 2012

The current trend of declining music sales will continue, according to Bloomberg.com, citing a study released recently by PriceWaterhouseCoopers LLC. Internet piracy and declining demand for compact discs are the main reasons behind the prediction that music sales will drop 12% by 2012.

As  consumers switch to online and wireless formats for music such as downloads, Internet radio and ringtones, revenue from online music sources will overtake physical sales by 2012. Because consumers tend to purchase individual songs rather than full albums when they purchase online, download music sales just don’t add up the way cd sales do.

Internet radio services such as Pandora and Last.fm will drive the increase in online music sales, according to a PWC analyst cited in the article, and collaboration between record companies and online music services will reduce the rate of illegal downloads.

This is another indicator of the benefits of mutually beneficial partnerships between the music labels and the online music services. Despite disagreements over royalties, the relationship between the two is symbiotic. While music labels are desperate to find new ways to grow revenue, online music services are reliant on the labels for the music they play.

Performance royalty payments are, in the end, nothing more or less than a revenue sharing agreement between the services and the labels. With that in mind, labels should be working hard to drive traffic to their Internet radio partners, who should be emphasizing music download sales to their audience and realizing revenue from that as well. Creative collaboration is the path to sustained profitability in digital music’s future.

Major Label Sues Grooveshark

I like music site Grooveshark, and have written about it several times (here, and here). They’ve got a great service that allows you to listen to any song you want. They’ve been exploring some unique revenue models – for example, in addition to selling advertising, they have a service that allows musicians or independent labels to purchase a certain number of song plays to listeners who like their kind of music.

I spoke with Jack DeYoung, VP of Label Relations for Grooveshark, and Josh Bonnain, VP Marketing, when I wrote an article about Grooveshark in May. At the time, I asked them about licensing deals. I wondered how they were dealing with the major labels given their on-demand streaming service is precisely the kind of thing that the labels dislike. Jack explained that their license was an “experimental” license with the record companies which allow them to stream songs on demand and share revenue with the labels and artists based on how often a certain song or artist is played. Yep, experimental was what he said – I went back and checked my notes. What he failed to mention at the time was that it was only an experiment on the part of Grooveshark.

Well…it turns out that might have been wishful thinking because EMI has now sued Grooveshark. In fact, it turns out EMI had sued Grooveshark prior to my first blog post on May 21st. hmmm.

In any event, as Peter Kafka points out in his article on this topic, Grooveshark now joins the list of services that are being sued by the major labels, and their chances of survival are looking rather slim. The labels – including some of the independent ones – see on-demand services as a threat to music sales. Other on-demand services – Imeem, MySpace Music for example, pay hefty fees to the labels.

I’m not sure what was going on with Grooveshark – but their experiment doesn’t seem to be working out so well…

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