CMU Weekly Editor's Letter

Editor’s Letter: Digital v Physical

By | Published on Friday 1 June 2012

Andy Malt

So, after last week’s look at fan funding and its potential to go the distance, we should begin by congratulating Amanda Palmer, who passed $1 million in Kickstarter funding on Tuesday. In fact, by the time the funding deadline came around on Thursday, she’d raised $1,192,793 – a full $1,092,793 more than her original target.

She will now get busy preparing for the release of her new album, ‘Theater Is Evil’, in September (a track from which, ‘Want It Back’, you can download here) not to mention all the book publishing, touring, backstage doughnut eating and house party playing she has to get on with.

Another milestone was passed this week, with confirmation that digital revenues overtook physical in the UK record industry for the first time in the first quarter of 2012. It’s possible many outside the industry assumed that milestone was passed long ago, but CD album sales remain very strong in the UK and have held out against the rise of downloads and streaming.

Until now. In the first three months of 2012, total revenue from recorded music in the UK, according to the BPI, was £155.8 million, 55.5% of which (about £86.5 million) came from digital services. The ongoing and presumably terminal decline of CD sales contributed to this, of course, but more positive and important is the boom in digital – not least the streaming services, subscription revenues from which almost doubled year on year. And there was another happy side effect too – total revenue for the quarter was also up by 2.7% year on year.

Commenting on these figures, BPI boss Geoff Taylor told CMU: “This is a significant milestone in the evolution of the music business. UK record labels have embraced digital to their core, supporting innovation and licensing more new online and mobile services than any other country. As a result, the industry’s prospects for growth look brighter than for several years”.

He added: “We will need to see this trend repeated for several quarters to say we have turned the corner – demand for physical CDs remains strong in the UK, especially in Q4. However, the creativity, investment and digital expertise of the British music industry point the way forward for growth in the UK economy”.

And there you go. Though that is basically what a friend of mine would call a ‘shit sandwich’ – burying the negative between two positives. Because this may yet be an anomaly more than a trend. As analyst Mark Mulligan noted this week, January is often a boom month for digital sales as people fill up the new tech devices they got for Christmas. But the pre-festive period remains the most important for music sales over all, and physical media still does particularly well there, as people buy CDs and vinyl as presents.

As for the second and third quarters of the year, well they’re still fair game, digital might continue to account for the majority of sales, or physical may win the title back. But it’ll be those all important final three months of the year that will be the clincher for digital. And for it to win through there, we might need to find a way of making digital music seem more like a valid Christmas present – the common iTunes voucher still not as compelling a gift as a carefully selected (or at least remembered) CD album.

But assuming digital will fully pass physical at some point in the next couple of years, will the continued growth of download and streaming services not only compensate for the ongoing decline in CD sales, but start to replace the already lost revenues CDs used to bring in back in the format’s 1990s heyday?

That 2.7% increase in record sales overall was also encouraging of course, but that too could be a wobble. Record companies are always keen to tell us they had a “quiet release schedule” in bad quarters, so perhaps the uplift at the start of this year was really the result of a good string of releases. Or simply the fact that seemingly there are still people out there thinking “hmm, perhaps this would be the week to buy that nice Adele record”.

But while pessimists are always looking for the flattening out of the digital music market (and for a moment a couple of years back it really looked like it might be happening), I do believe the whole digital domain still has a lot of unrealised potential. While new digital services continue to launch all the time, in the main the market is still made up of just three basic products – the iTunes style service, the Spotify style service and the sort of service offered by Pandora. And I suppose you might want to throw in the ad-funded jukeboxes offered by YouTube and VEVO. But have we yet truly explored all the potential for providing music digitally?

And even if we have, have we worked out how to present each of these four main platforms in a way that appeals to everyone, especially the mainstream customer, the two-CDs-a-year consumers who may be yet to download their first MP3 or to log on to YouTube. In the music industry we tend to obsess a lot about how to offer all-you-can-eat music services at affordable prices, and yet a lot of research tells us most people don’t want all-you-can-eat – in fact they probably can’t cope with it, present them with a Spotify-sized catalogue and their minds go blank.

More recently us industry and media types seem to have started obsessing about ‘music discovery’, and ‘sharing music experiences online’, which both have a place obviously – though most mainstream consumers don’t actually want to be bombarded with a plethora of new bands every day (these people listen to Heart and Magic remember), and I suspect many aren’t particularly interested in discussing or sharing music either, they just want to be able to sing along to that track off that advert while cooking dinner or cleaning the bath.

Have we created the right kind of digital service for that person yet? Admittedly I’d not personally want to use that service – and I suspect you wouldn’t either – but a lot of people would, and for digital to truly come of age it’s that ‘lot of people’ we should probably be trying to reach as an industry.

Plus, while I’m already a big fan of certain streaming platforms and discovery services, there’s probably even further developments in the digital domain that would better engage a music fan like myself. Instead of a discovery service, how about a music re-discovery service? This morning I played an album I used to listen to in my car while I was at university. This then sent me down a Spotify hole chasing albums I hadn’t listened to in years that weren’t immediately available to me.

Anyway, the point is this: the British record industry should be excited about the statistical milestones it passed this last quarter, but we’re not there yet – so let the ideas continue to roll, and let’s all agree to regroup for a proper party once the digital revolution is fully complete.

Andy Malt
Editor, CMU

The podcast this week is the usual fun filled fandango (I couldn’t think of a more suitable word beginning with F I’m afraid). This week it features discussion of Amanda Palmer, digital v physical recorded music revenues, The Pirate Bay blocks, the new NME editor, plus Metallica being forced to tour.

The podcast will be online here later this weekend.

So there was much chatter about digital music and the internet again this week, though it wasn’t all sweetness and light. Sean Parker said that he suspected Apple of attempting to block Spotify’s US launch, while Sky became the third UK ISP to block access to The Pirate Bay. And Google revealed which rights owners have requested it to remove links from its search engine, with the BPI coming in second to Microsoft having made 182,805 requests between July 2011 and May 2012.

The NME got a new editor this week, with former deputy ed Mike Williams taking over the role from Krissi Murisson. He steps up at an interesting time, with the NME brand arguably stronger than ever, but the print publication that started it all is in terminal decline (despite valiant efforts by Murisson to revive it).

Over in the world of HMV, there was an update to the company’s attempt to sell its live division, aka the MAMA Group, with the news that the Hammersmith Apollo will be sold to a joint venture between AEG Live and CTS Eventim. AEG Live-promoted artist Usher will christen the venue’s new ownership later this month (even though the deal probably won’t complete until later this summer) with an interactive show that will see fans join him on stage in the form of ‘holograms’ (and they won’t even have to be dead to do it).

Usher’s protégé Justin Bieber was also in the news this week for a variety of reasons. Most of the week was taken up with discussion about an alleged attack on a paparazzo committed by the Biebster, which may or may not have resulted in painful injuries for the photographer. Then it seemed like we’d shot back to 2010, as fans got out of control at a free show in Oslo, and Bieber knocked himself out when he walked into a glass wall in Paris.

And finally, we had a lot of fun with Grooveshark’s new data site Beluga this week. Designed to show how incredibly useful the site’s data could be if the major labels would just stop trying to sue it out of existence, it compares market research results to respondents’ listening habits. As such, we have learned that most Faith No More fans are overweight, work in the mining industry and don’t know who insures their car; almost all Cannibal Corpse fans own a pet reptile; and most Busted fans have never completed any level of education, are unemployed, and prefer CDs to downloads.

We’ve got some great features this week, starting with a playlist from Crocodiles, who gave strict instructions for when it should be listened to. So if you’re planning to put lipstick on a German Shepherd any time soon, this is your lucky day. As well as that, Eddy Temple-Morris wrote a love letter to Sheffield and its unnaturally large number of great musicians, and in the Beef Of The Week The Enemy‘s attempts to be nonchalant about their chart position fell flat. Plus, there were many festival line-up updates.

In the Approved column we had a podcast from Future Of The Left promoting their new album, plus new tracks from CrewdsonFoxygen and ILLLS, and a tip for a great club night this Saturday hosted by the Soundcrash team.

But that’s not even it. There was loads of new music pouring out of CMU this week with videos from Bloc PartySlipknotBengaDan Le SacA Place To Bury Strangers and Chilly Gonzales, plus straight audio from The NationalThe VaccinesCFCFMatthew DearFoxesTeengirl FantasyHurray For The Riff Raff, and Beat Connection. Once you’re done listening to those, check out this documentary about acid house and the culture surrounding it in the late 80s and early 90s.