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JAN
3
7 MOS

Digital Music Sales Decrease for First Time in 2013

Ad-supported and subscription streaming services may be eating into purchases.

20/20 Experience Part 2 Album Cover - P - 2013
Justin Timberlake's "20/20 Experience Part 2" cover

This story first appeared on billboard.com.

For the first time since the iTunes store opened its doors, the U.S. music industry finished the year with a decrease in digital music sales.

While the digital track sales decline had been expected due to weaker sales in the first three quarters, the digital album downturn comes as more of a surprise as the album bundle had started out the year with a strong first quarter.

Overall for the full year 2013, digital track sales fell 5.7 percent from 1.34 billion units to 1.26 billion units, while digital album sales fell 0.1 percent to 117.6 million units from the previous year's total of 117.7 million, according to Nielsen SoundScan.

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While industry executives initially refused to attribute the early signs this year of digital sales weakness to the consumer's growing appetite for streaming, in the second half of the year many were conceding that ad-supported and paid subscription services were indeed cannibalizing digital sales.

While SoundScan has not yet released its annual streaming numbers, so far industry executives have been reporting that the growth in streaming revenue has been offsetting the decline in digital sales revenue.

Overall, album sales suffered an 8.4 percent decline, dipping to 289.4 million units from nearly 316 million units in 2012. The CD declined 14.5 percent to 165.4 million units, down from 193.4 million in the prior year, while vinyl continued its ascension rising to 6 million units from the 4.55 million the format tallied in 2012. That means vinyl is now 2 percent of album sales in the U.S; digital albums comprise 40.6 percent; the CD is 57.2 percent and cassettes and DVDs 0.2 percent.

Meanwhile, album plus track equivalent albums fell to 415.3 million units, down from 449.5 million units in 2012, which represents a 7.6 percent drop.

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Despite the decline in album sales, million sellers increased in 2013 to 13 titles versus the 10 that passed that milestone the prior year when Adele's 21 led the way with 4.4 million units, followed by Taylor Swift's Red, which scanned 3.1 million units. In 2013, only one album sold more than one million units: Justin Timberlake's 20/20 Experience, with 2.4 million units.

The top selling track in 2013 was Robin Thicke's "Blurred Lines," featuring T.I. & Pharrell, which scanned nearly 6.5 million units, followed by Macklemore & Ryan Lewis' "Thrift Shop," featuring Wanz with 6.1 million units and Imagine Dragon's "Radioactive" with 5.5 million units. Gotye's "Somebody That I Used to Know" featuring Kimbra was the top-selling digital song with 6.8 million units the prior year.

In 2013, 106 songs hit the million units mark, versus 108 titles that achieved that feat in 2012.

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Moving over to market share, the Universal Music Group came in first with 38.9 percent in albums plus TEA, thanks to its acquisition of the Capitol Music Group, while Sony Music Entertainment finished with 29.5 percent, and the Warner Music Group tallied 18.7 percent. While these market share totals are by distribution ownership, where indie labels collectively are calculated as having a 12.3 percent share, next week's Billboard also will show market share by label ownership where the indies are expected to have nearly 35 percent market share.

In genres, R&B, which includes rap, was the only genre to post an increase in 2013, with album sales growing 1.2 percent to 50.7 million from 50.1 million units in 2012. All things considered, this is pretty impressive in a year where album sales declined 8.4 percent. The only other genres to outperform the U.S. album market were EDM, which declined 0.3 percent to 8.8 million units; and rock, down 5.9 percent for the year to 100.8 million units.

Despite the decline in digital album sales, download stores, such as iTunes, gained market share, growing to 40.6 percent of U.S album sales, while mass merchants, like Target and Walmart, saw sales drop 16.3 percent to about 78 million units and now comprise nearly 27 percent market share, with chain stores, such as Best Buy and Trans World, seeing sales decline by nearly 20 percent to 39 million album units to comprise 13.5 percent market share.

Meanwhile, nontraditional CD merchants, such as Amazon, Starbucks and concert venues, saw album sales increase by 2.4 percent to 36.5 million units. And indie merchants dropped by nearly 12 percent to 18.3 million units. Respectively, the former comprises 12.6 percent of album sales while the latter accounts for 6.3 percent.