The global recording industry is struggling in a rapidly changing marketplace.
"Digital formats such as online downloads, ringtones, mastertones, full tracks delivered to mobile handsets and Internet and mobile subscription services are providing new and growing revenue streams," says Paul Verna, eMarketer senior analyst and author of the new report Recorded Music: Digital Falls Short.
“But these new revenue streams are simply not enough to pick up the slack from free-falling CD sales,” he adds.
Bad news. But worse is that unless there is a sudden reversal of current trends, the recording industry can look forward to continued losses in the coming years.
eMarketer estimates that worldwide spending on recorded music will actually decline—falling from $31.8 billion in 2006 to $26.2 billion in 2011.
Similarly, US spending on recorded music is expected to drop from $11.5 billion to $9.3 billion during the same period.
“The situation in the industry has gotten so bad that many top recording artists are steering clear of music companies and signing up with brand marketers whose expertise lies outside of the recording industry,” says Mr. Verna. “Witness the alliances between Paul McCartney and Starbucks, the Spice Girls and Victoria’s Secret, and Madonna and Live Nation.”
Recently, the UK band Radiohead took the unprecedented step of issuing its latest album, “In Rainbows,” in digital form and allowing its fans to determine the download price.
“Digital distribution may be no panacea, though,” says Mr. Verna. “The results of the Radiohead experiment are discouraging for the industry and the value that music fans place on recorded product.”
According to comScore Networks, worldwide only 38% of those who downloaded the full-length album chose to pay for it.
And even then the average price paid by each downloader for “In Rainbows” was merely $2.26, when also including those who paid nothing.
“There is one caveat in comScore’s findings, however,” says Mr. Verna. “The sample audience comprised ‘home and work locations’ but not colleges.”
Given Radiohead’s popularity among college-age fans, including that group in the survey might have yielded different results.
“The next few years will be critical as labels, online retailers, mobile carriers and artists attempt to find new models, or refine existing ones, in an effort to restore some of the gold and platinum shine that the business has lost in the digital era,” says Mr. Verna.