Music Biz Monday – Are Physical Music Sales REALLY going up?

Music Biz Monday – Are Physical Music Sales REALLY going up?

In addition to our weekly features such as News Nuggets and Sony’s Devotions, we will also be starting a new series called Music Biz Mondays, where we take a look at various aspects of the music industry, both in SG music and as a whole. To start things off, let’s take a look at the sales numbers between music formats.

There is a growing trend among die-hard music fans. Instead of settling for digital files downloaded or streamed, fans are clamoring for physical formats – in particular, vinyl records. The format once deemed outdated by the early 90’s has been making a steady comeback as a niche market. In fact, as chain-based entertainment stores continue to disappear and big-box retailers like Best Buy discontinue stocking CD’s, independent local record stores specializing in new and used vinyl releases are growing in number.

With this type of increasing market, one would think that physical sales are actually on the rise. In fact, a recent headline on Paste magazine declared:

Physical Music Sales Are Outpacing Downloads for the First Time Since 2011

Just looking at that headline, one would make the assumption that physical sales numbers have actually increased over the last year. However, if you read the article, the opposite is actually true:

Overall physical sales decreased four percent from 2016, which the RIAA say is “a lower rate of decline than recent years.” As many have long seen coming, digital downloads are in trouble, as they fell 25 percent in the U.S. in 2017…

So in reality, physical sales have NOT increased. They continue to decrease. They’re just not decreasing as rapidly as digital downloads are. In essence, the carefully-worded headline is not necessarily false; physical sales ARE outpacing digital downloads in that they’re not falling as rapidly. It also doesn’t take into account the prevalence of streaming services such as Apple Music and Spotify, which beats both physical and download formats at 65% of total music revenue. (You can view the RIAA’s industry report here.)

The Paste article also notes that Apple, whose iTunes platform helped revolutionize digital music sales (and helped make the format legitimate), is reportedly making plans to phase out all download abilities within the next year, with their Apple Music streaming service becoming the go-to method for listening to music. While Apple denies such a move (at least as of yet), it makes sense with the prevalence of streaming music. And if the top source of download purchases goes away, then streaming logically will continue to rise.

What does this have to do with southern gospel music, though? It’s always been its own beast in terms of sales. As Gerald Wolfe noted in our recent interview, if an artist were to rely solely on streaming for revenue, one would have to have nearly 40 million streams to break even on a recording. His solution is to block digital distribution until physical sales allow for cost recoup. In a genre that is historically hesitant to any type of change, this may work for them for the immediate future, but as physical sales continue to decline across the board, it may not be a sustainable business model.

On the surface, Wolfe’s plan makes sense – IF physical sales are consistent. However, even in SG music, the availability of physical product is falling drastically. Family Christian Store, once the largest Christian retailer in the US, went out of business last year. Similar retailers such as Lifeway, although still intact, have slashed their in-store music catalog to mostly top-40 CCM or P&W titles. What little SG product they carry is limited to mostly Gaither-branded releases that carry little risk of returns. So while physical sales in the past may have recouped recording costs fairly quickly, one has to take into account the lower overall physical sales numbers. While in 2007, an artist may have moved 8,000-9,000 units in a year (or an average of around 25 CD’s per day) – enough to recoup their recording costs – that number maybe closer to 2,000-3,000 today, which means it would take closer to 2-2.5 years just to break even on physical sales alone, and since SG’s physical retail market space is dwindling, just trying to find the product locally may be enough of a challenge that SG consumers may just not buy it.

And yes, I know that you can always order the product online, but a lot of folks fail to see the value in impulse buys, or buying something just because you see it there. If you have to seek a product out, it’s not an impulse buy.

Going back to Gerald’s plan, if an album is not available in any digital or streaming format, you then force consumers to purchase the physical product if they want to hear it. Since you don’t have any digital formats to take away from physical sales, then I’m sure the overall physical sales will naturally go up (at least somewhat). The question is, does that uptick in physical-only sales outweigh the potential benefits of physical plus streaming/digital sales?

The next question is, how many consumers are exclusive in their buying habits? If you stream an album on Apple Music or Spotify and wind up enjoying it, are you more likely to purchase that album in either a digital or physical format? If an album is not available for streaming, are you encouraged to purchase a physical copy, or do you simply skip that album altogether?

Kyle Boreing

Kyle has been writing for MusicScribe since 2008. He is a musician, producer, arranger, and occasional quartet singer, who pays way too much attention to recordings. He is an alumni of Stamps-Baxter School of Music and has shared the stage with many different artists. He also really likes movies that are "so bad they're good." Visit his website at www.kyleboreing.com, or follow him on Twitter @kyleboreing.

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