The transition to the streaming ecosystem in the U.S. is picking up steam. The decline in download sales accelerated in the first quarter to nearly match historic drops in CD sales from 2007-2010.
At the end of the quarter, digital tracks were down 12.5 percent, to 312 million units from 356.5 million units. Digital albums were down 14.2 percent, to 27.8 million from 32.4 million in the U.S., according to Nielsen SoundScan. Looked at another way, taking into account digital albums plus track equivalent albums (whereby 10 tracks equal one album), U.S. digital sales were down 13.3 percent in the first quarter of 2014. In contrast, even though U.S. digital sales over all of 2013 were down 3.1 percent, at the end of the first quarter of last year, digital sales were actually up 3.9 percent at the end for the first quarter.
For the first time since the advent of digital sales, the format’s declines resemble the now-routine annual percentage declines for the CD in the new millennium, when drops in CD sales ranged from 18.2 percent to 19.7 percent each year from 2007-11.
However, digital interactive streaming — not including passive streams from services like Pandora, iTunes Radio and Sirius — appears to be making up the slack, on a revenue basis at least. According to SoundScan, interactive music and video streaming totaled 34.28 billion streams in the first quarter of the year, versus 25.44 billion streams in 2013’s corresponding period. Not only have streams grown by nearly 9 billion, but per-stream payout has improved this year versus last year, according to label sales executives.
Last year, interactive streams paid an average of $0.00375 per stream, meaning 2,000 streams equaled the average $7.50 wholesale — the average price when you consider the $9.99 list price for most albums and $11.99 for some superstar albums — for a digital album download. This year the industry average is more like $0.005, which means that 1,500 streams equal the wholesale cost of an album.
Figuring 2,000 streams per stream equivalent album last year, and 1,500 streams per stream equivalent album this year, that means that SEA totaled 22.85 million in the first quarter of this year, while last year totaled 12.72 million, a difference of 10.1 million album units. So, while digital albums and track equivalent albums were down 9.06 million units, streaming revenue growth is outpacing digital sales decline.