iTunes sales "collapsing," blanket licensing to succeed?

It wasn't too long ago that ole Steve opened a few of his famed keynotes boasting about just how much money was flowing into the iTunes Music Store, and now we've even got the option to snag feature films and TV shows if our wallet so desires, but it appears that even the streamlined, previously trendy iTMS may be on the decline. It's no secret that folks looking to pick up some new tunes would like to avoid DRM at all costs, but instead of seeing CD sales skyrocket, there's simply been a general decrease across the board in the whole "music buying scene." While digital downloads initially looked to fill the void, that theory seems to have been short lived; since January, the monthly revenue going into Apple's iTMS has fallen by "65-percent," with the average transaction size falling "17-percent." Notably, it's not just Apple suffering the cashflow drought, as Nielsen Soundscan reports that the digital download "industry as a whole" is steadily declining. Additionally, research has shown that the "median household" spent just "three dollars" about six times per year, showing that digital downloads aren't exactly "replacing the CD," but rather complimenting hardcopy sales at best. Interestingly, analysts are theorizing that the DRM-era may actually be winding down in favor of "blanket licensing," which was cast aside just years ago in favor of the "per purchase" approach. Discussions are already taking place in the UK to test the waters of such a bundle package, but we don't realistically expect the business model here to change overnight -- but considering the duties the RIAA wants to toss on anything digital, we wonder just how attractive a new plan will be.

UPDATE: Based on Forrester's reports, the data cited was from the first six months from the previous year, which leaves open the possibility of seasonal swings skewing sales.

[Mathew @ Dec 12th 2006 12:14PM]

The problem is that hardly anyone over the age of 25 buys music anymore. Teenagers still probably get most of their music via bittorrent or "borrowing" one of their friend's cds. For myself, DRM is a definite issue. I use a squeezebox to stream my music and songs purchased from iTunes don't work. I don't listen to pop music and will pay $14 for a CD if I like the band or the artist.

[Rick @ Dec 12th 2006 12:16PM]

Ridiculous. Sales are largely seasonal. Just wait until all of those gift cards get used.

[tristanfey @ Dec 12th 2006 3:15PM]

Seasonal or not, the 65% downturn is for the entire year to this point. That covers quite a bit of sales months. On top of that, it is compared to the previous year to get the percentage, so seasonal trends would not apply as they should be basically the same buying trends for the previous year.

[Galls @ Dec 12th 2006 12:21PM]

The Problem is that new music universally sucks, and when the people who have the money don't care for the same repetitive garbage coming out of the RIAA then we do not buy it.

[BK @ Dec 12th 2006 1:43PM]

Hear, hear! Just when I thought it couldn't get worse than "Fergilicious", I hear Gwen Stefani's "Wind it up" on the radio. Are people seriously going to pay good money to buy these "songs"?

[Alex @ Dec 12th 2006 2:43PM]

Um, not to point out the obvious but all music was new at one time or the other. Years from the mentioned bands may be the new bach... okay, not likely, I admit, but still something to keep in mind.

[Smeagol @ Dec 12th 2006 12:23PM]

I get all my music on CD still; you cant beat a physical copy and uncompressed PCM. And, a lot of my CDs come off eBay since its 60-80% cheaper.. and, which arent counted in any surveys.

[Todd @ Dec 12th 2006 12:27PM]

I have been expecting this since the old Napster days ( circa 1999 ). I am kinda surprised it took this long. Oh well, the RIAA and the music industry in general had a good run, but their failure to adapt has resulted in the above "reality check".

I am glad to see the crooked music industry finally die - Microsoft, and your "vendor locked" license thing, you're next.

[Thomas Sullivan @ Dec 12th 2006 12:29PM]

The problem, as evidenced by me, is the DRM. I used to buy a lot of music from Apple iTMS. But since it can not be universally used on my system (SONOS BASED), I no longer use the iTMS.

[johnny5 @ Dec 12th 2006 12:30PM]

I am not entirely sad to hear this. It's about time people look elsewhere for their music purchases. If companies in NA would follow the pricing examples of such companies like AllofMP3.com they would sell a lot more. A steady business is more successful than one that fluctuates constantly. Volume is key.

[Bob @ Dec 12th 2006 12:33PM]

You know why current music sales are down? Because most of it sucks! Put out some good music and sales will go back up.

[Loban @ Dec 12th 2006 2:44PM]

What? You don't like Hillary Duff and Nickelsuck, I mean Nickelback? ;)

[LittleJoe @ Dec 12th 2006 2:17PM]

I have to agree with the whole "the music scene sucks right now" chants.


I mean, I haven't even ILLEGALLY downloaded anything in a long while.

[Ian @ Dec 12th 2006 12:34PM]

I only buy CD's because I want the hard copy just in case something bad happens. But CD's are also expensive, and between video games and DVDs and Cable television and new iPods and new versions of windows, there is just a lot less money to buy new CDs. Also, I buy a lot of CDs used from indie stores, which probably doesn't count towards these things. The bigger issue though is that my better half, who does buy iTunes songs, had her harddrive wiped clean and lost the iTunes songs-- since iTunes doesn't let you re-download songs but DRM's the files you download, backing up the files is terribly difficult. Anyway, DRM is going to kill old media.

[Michael @ Dec 12th 2006 1:29PM]

Have her call Apple and tell them what happened, they will let her download them again. This happened to my wife.
Also backing up DRM'd music from itunes is very easy, just burn it to a data CD or DVD or copy it to another hard drive. The only time the DRM gets in the way is when you try to play it, that's when it asks you for your info. So as long as you're not giving it to your friends and truly backing it up for yourself it's not a problem.

Not saying I'm all for DRM, just trying to be helpful.

[Dereck Bearsong @ Dec 12th 2006 12:39PM]

Quote:
It's no secret that folks looking to pick up some new tunes would like to avoid DRM at all costs, but instead of seeing CD sales skyrocket, there's simply been a general decrease across the board in the whole "music buying scene."

jee, you think perhaps it may have something to do with music in general degrading into nothing but a mindless rehash of songs that came out 20 years or more ago and warped into mindnumbingly repetitive sounds of woops and "hollas"? I can find more musical talent in the hands of doped up chimps with baby toy instruments than from these people.

[LPD @ Dec 12th 2006 12:40PM]

Collapsing from what? If you divide the number of iTunes downloads by the number of iPods sold it only about 20 songs per iPods. And that includes free downloads.

[chenry @ Dec 12th 2006 12:41PM]

I haven't got a lot of music from any source lately; iTMS, HMV, pirating.. whatever. There's just no music worth having right now. Nothing new at least.

[Lou @ Dec 12th 2006 12:47PM]

Wow, does the market economy really work. If you continually deliver a poor product (not to mention one crippled with DRM and copy protection) the market will react. The pop music out there generally is just not worth it, they may be one decent song on a CD so kids will just pirate it, the older demographic isn't the music buying force, and they don't see anything worth buying either. If music companies put a better product out there, people would buy it.

The record label model is dying in favor of indie labels that can find music and bands quicker, put them out for cheaper, and have wider internet distribution.

Also, recording technology has gone so far, bands that are selling in the indie scene have often already recorded an album and put it on the internet before they are signed. I know labels do promotion and front money to new bands, but do we really need multinational conglomerates to do this.

[Kevin @ Dec 12th 2006 12:49PM]

I think that the main reason I haven't been buying as much from the iTMS is because of the 128kbps compression. I haven't used that since my hard drive was smaller than 10GB. I would even be willing to pay more for the ability to get a higher bit rate.

The DRM sucks, and is easily avoidable, I think the problem is the sound quality on the small amount of music that I do like.

[craig @ Dec 12th 2006 5:12PM]

I hear people complaining about the "poor sound quality" of the iTunes (128K AAC) files... well, I'll give you a dollar if you can tell the difference between that and the uncompressed 16bit PCM file.

Sure, I don't like not having the option of buying the full-resolution audio (like what's on audioCD) but you're mistakenly comparing the 128K bit rate of their AAC (MP4) format with the poor sound quality of a 128K MP3 (which does sound bad).

There is a HUGE difference between a 128K MP3 and a 128K MP4... and not much (audible) difference (if any) between a 128K MP4 and a full-quality WAV/AIF.

[Jason @ Dec 12th 2006 12:50PM]

Drop the DRM and Ill start buying music from Itunes. Until then Ill still be picking up CDs. We have more than one music player in the house and only one is an Ipod. I like the idea of one song purchases, but I have to be able to play them on all of my playing devices to make it really worth it.

[Daniel Downing @ Dec 12th 2006 12:50PM]

DRM is teh gayzorz and I am glad Apple are being hit where it hurts as a result.

[Javaflash @ Dec 12th 2006 12:55PM]

Wow, iPod sales are way less dependent on DRM than previously estimated.

Just a reminder, Apple earns next to zero on sales happening on iTMS (about 9 cent every track, and most goes to cover distribution expenses).

[Tech^Cellfish @ Dec 12th 2006 12:56PM]

Before:
Radio out
Walkman in

Now:
Music out
Video in

[Mrfreezie @ Dec 12th 2006 12:57PM]

DRM hurts it. It scares people into not buying a song, in fear that in a year or so they will get a new MP3 player or something, then that song will be useless.

Music in general is messed up, already mentioned DRM, but the price for a CD is too expensive. $15 for some music? That's too much for something that is something you can't even physically touch..

My fix: Get rid of DRM and lower CD prices to $10.

[John @ Dec 12th 2006 12:58PM]

I agree with some of the previous commenters. This is a content issue. There were no albums released this year that I was really really anticipating and bought on release.

[RusskieMp3 @ Dec 12th 2006 1:12PM]

I use allofmp3 since it is DRM Free, you pay per MB, fast downloads and good quality service. If itunes was like allofmp3, apple would see more profits. DRM free AAC music/video, pay per file size.

[christine @ Dec 12th 2006 1:00PM]

maybe because the music itms promotes is sucky???

[Ed @ Dec 12th 2006 1:06PM]

I think the "content sucks" argument only holds up for mainstream music. There is plenty of innovative music being produced by independent bands on independent labels. Perhaps you (the complainers) don't care enough about what you listen to to discover new artists.

[soundoftheground @ Dec 12th 2006 6:35PM]

"I think the "content sucks" argument only holds up for mainstream music. There is plenty of innovative music being produced by independent bands on independent labels. Perhaps you (the complainers) don't care enough about what you listen to to discover new artists."

this is me. i buy new music regularly (cd's), but 99% is from small independent labels.

[bpjauburn @ Dec 12th 2006 1:36PM]

But the sales are mostly driven by major label "artists". for every Britney Spears that sold 5 million copies of her crap, it takes a heck of a lot of "indie" artists to make up the difference. The old 80/20 rule.

I think the reason is complicated: crappy mainstream music pushed by the major labels; lack of a DRM standard and the resulting difficulty of use; very expensive CD's; sharing; eBay where you can buy a used CD for a fraction of the cost; Russian sites; and the RIAA attacking it's customer base.

The RIAA and the labels had a chance to adopt a new model and instead have chosen to kill themselves slowly by protecting the old technology/business model. They are reaping what they have sewn.

[Pinkerton @ Dec 12th 2006 1:48PM]

Sounds great in theory, but AllOfMP3 does not reimburse labels/artists, and is therefore illegal in many parts of the world. The main legal difference between AllOfMP3's business model, and me selling MP3s to people, is their location (Russia) and weak laws that encourage such behavior (see also -- China).

[Arno @ Dec 12th 2006 1:13PM]

O, let it be so. Maybe Apple and it's "culture" of "hip" people can die as well? Please?

[IpodIvan @ Dec 12th 2006 1:17PM]

I'll make it real simple....these corporate morons need to get rid of drm, id get rid of limewire and use ITMS if they did that!

[csnoke @ Dec 12th 2006 1:23PM]

My favorite part was where you title the post "iTunes sales collapsing" and then go on to describe how the entire music industry is decreasing right now.

[Elliott @ Dec 12th 2006 1:23PM]

I'm glad, I thought it was just me that thought todays music is just getting more and more repetitive. Yeah I think the decline in sales on iTunes (and also closure of record store giant Tower Records) is more related to the decline in good original music.

[varmac96 @ Dec 12th 2006 1:42PM]

First I find the number of Folks complaining about the quality of music lately interesting ( and I totally agree), Next the whole DRM thing is a RIAA deal not Apple. or M$ or anyone else it is the greedy suit at the Record Companies.
Heres' the break down I heard cannot confirm..
song sale 99�
iTMS 29� - network , advertising etc they are not making money
Band/Artist 06� - the writer artist etc gets..elw you know
Record Co 64� - who's getting Fat and ripping us off...hmm....the get the lions share for NO work

[GJP303 @ Dec 12th 2006 5:07PM]

damn rite! look at the top 100 on itunes. I personally don't like that type of music but apparently a lot of people do.

[Ken @ Dec 12th 2006 1:44PM]

After pouring money into a 60GB Sony PS3, a couple of games (RFoM, CoD3, RR7), an extra Sixaxis controller, and HDMI cables, I don't have time or money left for iTMS.

With the XBox 360, Wii, and PS3 all out, how many people are still going to the movies several times a month or downloading off iTunes? Honestly, I'd rather be HD gaming.

[embee @ Dec 12th 2006 1:46PM]

Why should I buy off of I-tunes? Any of the new stuff I can buy from a bootlegger, which the NYPD seems not to care about one whit. Moreover, for smaller bands, I buy their music at the show or borrow from friends.

[Manuel @ Dec 12th 2006 1:47PM]

i agree... i blame bad music + DRM for this ...
personally the ONLY cd i bought this year was from Depeche Mode.

[Trent @ Dec 12th 2006 1:50PM]

It's the DRM for me. I have A LOT of CE devices. I would consider myself a device junkie. But if the media is not inter operable between all of the devices, not going to buy it.

I bought my daughter an Ipod and she never uses it. She uses my wifes old 10gb Archos because she can move files from her Laptop>PC>Archos at will without having to go download some sketchy home brew software just to rip out the DRM so she CAN put it on another device.

Ease of use is the key and "DRM and ease of use" can;t exist in the same sentence.

[fminus @ Dec 12th 2006 1:53PM]

Perhaps $15 should get you something of value. It's obvious that a downloaded album from todays sub-stellar musicians, at a poor bit-rate, and one that can only be played on a specific player just isn't worth our $15. The solution would to pay $15 for a lifetime limited rights contract to the music. So whenever a new player or media format comes around, you can download or receive it for free. How stupid is it to always have to repurchase you collection.

[Trent @ Dec 12th 2006 1:53PM]

Oh forgot to add that the RIAA sucks. (MPAA too!) I hope there are no x-mas bonus checks for anyone at either org.

Stop suing your best customers dumbasses!

[Joel P @ Dec 12th 2006 1:54PM]

I think the problem is two-fold. First, it's true that the majority of new music is complete crap. I mean look at the top list on iTunes, Beyonce? Justin Timberlake? Avril Lavigne? What that heck that about? People actually paid money for that crap? Now there is good music out there, you just have to actually look for it. It's also a product of our time. In a time when colleges are shortening classes because of shorter "attention span" no one actually "listens" to music anymore. It's just background noise. The other reason I think is that a few years ago there was lots and lots of talk about coming down on pirating etc. I think iTunes had the success it had because it was the first reasonable solution to avoid the legality issue. But now a few years later, nothing. There was no serious consequences and people a realizing that you can still get away with piracy, and why the heck wouldn't you?

[homelessDepot @ Dec 12th 2006 2:07PM]

I agree to a point with many of the posts that cite a lack of quality music being a key to the overall decline. If you look at Amazon they have a Beatles remix cd at #4, and it is actually sold out as I post this.

That said, I think that even savvy users at first ignored the DRM from iTunes because it was new, cool, and worked with their shiny new iPods.

Now the DRM is a gripe even less sophisticated users are keenly aware of, and users are dropping DRM-laced music in droves.

I no longer purchase iTunes music instead relying on eMusic, insound, and amazon for all of my music needs. The only real compromise I'm making for the cause is if I just want one song and eMusic doesn't have it, I have to buy the whole thing on cd.

[PXLated @ Dec 12th 2006 2:09PM]

You need to read the recent (just released I believe) Akamai report that tracks "actual" downloads. It appears to contradict this whole notion of things being down. But, I suppose you couldn't use the word "collapsing" then.

[Metal4Evah @ Dec 12th 2006 2:14PM]

I blame emo.

[iLLW!L @ Dec 12th 2006 2:14PM]

http://img454.imageshack.us/img454/4485/itunesmusicsalesyj9.png

Not a collapse.

Not near 65% drop.

Decline from Jan to Sep 06: 30%
Sept 06 vs Sep 05 growth: 21%

Does anyone know the seasonality of CD sales?