The third quarter of 2006 is in the books and the results really come as no surprise to anybody that has been paying attention. The upshot: CD sales are down, digital download sales are up and nobody is paying much attention to RIAA lawsuits anymore.
Physical sales of music dropped by 8.3% for the first nine months of ought-six, to a still whopping 370.5 million units, down from 404.2 million from last year. What does that mean in terms of real dollars? Dunno…the industry is coy about releasing sales numbers for fear that folks will realize that things aren’t quite as stinky as they seem. An educated guess would be somewhere in the $5 billion range, with another half-billion or so coming in from digital sales. The sale of digital "albums" jumped 115% to 22 million virtual units, while the sale of individual digital tracks (i.e. what we used to call "songs") blew past the industry’s wildest dreams, jumping 72.6% to 418.6 million units.
Using a bit of accounting sleight of hand, the industry adds the number of digital albums (with 10 songs equaling one album, along with full-length album downloads) to the number of physical albums to get a total of 434.9 million units. This represents an increase of 7.5% over the same period last year. Of course, they’d be the first to tell you that digital downloads are less profitable than physical sales, yadda yadda, and that peer-to-peer and home CD burning are killing the industry. Who really knows for sure? I can foresee the biz breaking $10 billion in total sales again this year, and although that’s a steep drop from past years, if industry execs didn’t burn through money like so much cheap champagne, everybody could be profitable.
No surprises to be found in market share, either. Of the "Four Families," Universal still rules the roost with 31.3% of the market, while Sony BMG comes up second with a 26.8% share. Warner Music, which is undergoing some trials and tribulations of its own, checks in with 19.2% while everybody’s poor little brother, Capitol EMI, comes up dead last with a feeble 10% market share. The independent sector actually comes in fourth, ahead of Cap-EMI, with a healthy 12.7% of the market divvied up among hundreds of various indie labels.
The best-selling album of 2006 remains Disney’s insipid High School Musical soundtrack, which has sold 3.1 million copies this year to date. Country beefcake band Rascal Flatts is closing in, though, in second place with 2.5 million in sales while James Blunt’s 2005 debut album is third in sales this year, chalking up 1.9 million units in ’06 alone. As the informed observer can see, no single disc has broken through to capture the hearts and minds of the music-buying public this year. Instead, sales seem to be spread out among more artists and labels, emboldening the indie ranks and making stars out of bands like the Killers and Hinder that can move 600 – 800k over the course of an album’s release.
Meanwhile, the first shots have been heard from the major label’s Q4 release schedule and the results are mixed. Justin Timberfake’s sophomore effort is selling steadily, if unspectacularly, and is certain to finish above the Platinum level, while Janet Jackson’ last album under her Virgin Records contract opened big and then sank like a stone. Still suffering from Super Bowl fall-out, poor Janet will begin looking for a new label home during the next year. Evanescence seems to be the dark horse in this race, opening with an impressive 400k+ in units sold and showing no signs of slowing down. Still on the horizon: high-expectation releases from Josh Groban, the Foo Fighters, Dave Matthews Band, John Legend and My Chemical Romance. None strike me as being industry saviors, however, and you can expect at least one of these releases to tank entirely.
Finally, the biggest news of the week was Google’s purchase of YouTube for an impressive $1.65 billion. The buy solidifies Google’s presence in the growing Internet video market and makes the two twenty-something year old founders of YouTube richer than thieves. My earlier comments about the video portal going down the "tubes" notwithstanding, with Google at their back and deals with Warner Music and Sony BMG in their pocket, YouTube is poised to become a dominant force in both Internet video and the music industry.
The company is also working towards massaging the feelings of the Copyright Cartel. As reported October 10th by the trade webzine Hits Daily Double, "YouTube said yesterday that it is developing a technology that will scan keywords and audio in the uploaded clips for potential copyright infringements." This move may not derail many lawsuits, but it will give them a leg to stand on when Google bankrolls their sojourn into court. Stay tuned, ‘cause methinks that this story is not quite finished….
