Online Retailing  

Spotify and iTunes lead a digital music revolution

Now that the holiday season is upon us Retail Digital revisits some of the most popular stories of 2011
 Apple is leading the digital download revolution with i..
 
 

With the marked development in broadband access over the past decade has come an explosion in digital music downloads. Sales through this medium have triumphed over traditional high street music retailers to the point where it has become the mainstream way to obtain music. As a result it appears that the future of physical music sales is bleak, suggesting that the once popular CD is set to go the way of the cassette tape in the not too distant future.

How did we get here?

The increasing popularity of the fast and simple mp3 music format means that physical sales at even popular online stores like Amazon and Play.com are slowly but surely decreasing, putting pressure on such companies to focus even more attention on their digital platforms.

Digital music sites and cloud-based programs such as iTunes, Spotify and Sony Qriocity are now amongst the most popular destinations for people when they decide to download music onto their PCs, Macs and mp3 devices.

Last year it was reported that digital music represented 98 percent of singles sales with digital album sales up by 30.6 percent - an increase from 16m to 21m – compared to the CD market, which fell by 12.4 percent to 98.5m in 2010.

The evident decline in high street and online music sales has created an uncertain future for the companies who have played such an important role in building and maintaining the standard music industry business model.

“The impact of the downloading business has been very difficult for physical retailers who have found it difficult to compete on price and range of offering,” says Clive Rich, a Professional Negotiator and Digital Media Lawyer. There are on average six million tracks available to download from online stores like iTunes. “You simply cannot stock that amount in a shop because of all the extra costs in the distribution chain. It costs a lot more to physically retail music then it does to digitally sell it,” adds Rich.

New cloud platforms

In order to keep up with the ever-evolving market, many well-known high street and online businesses have taken the next step in creating their own digitally-based programs, leading to the existence of hmvdigital.com, Amazon cloud player and many more.

HMV released its digital music site in July 2010 in direct competition with Apple’s hugely successful iTunes program. By the end of that same year HMV announced that it was closing 60 UK stores over the course of 2011 as a result of its latest Christmas sales dropping by 10 percent. The company claimed that its high street sales were affected by the difficult weather conditions experienced by the country in December 2010, although they also admitted that illegal music downloads were a main contributor.

“HMV has certainly made efforts to translate its brand into a digital format,” says Rich, who has extensive knowledge of the music industry, having enjoyed a seventeen year career with Bertelsmann's BMG and then Sony/BMG. “It is often quite difficult for traditional physical retailers, like HMV, to get to grips with the marketplace because it is relatively unfamiliar territory,” he adds.

HMV is currently struggling for survival. The UK’s last-standing specialist music retailer issued its third profit warning for 2011 earlier this year.

Downloading vs. purchasing

Despite the recent crackdown on illegal music sharing sites the pirating of material is predicted to remain a large problem for the music industry. Unlimited download programs such as Spotify which offer streaming music at mark down prices to consumers have also had an impact on declining CD sales.

Customers who frequently choose to purchase music digitally instead of buying a physical copy tend to prefer the quick and simple process involved. The online medium enables people to instantly listen to their mp3 downloads whilst at the same time uploading such files onto mp3 players and mobile phones.

Despite the evident decline in physical music purchases the industry is not all doom and gloom. It is predicted that there will still continue to be a market for physical music sales in the same way that vinyl record shops continued long after the advent of mainstream CD sales. There are still many who prefer the physical appeal, artwork and possession of their music products and enjoy the experience offered by knowledgeable local retailers.

Rich believes the final death knell of the physical music industry could still be some way off. “I don’t think they will ever disappear but CDs are clearly declining in popularity. This makes shops like HMV struggle to keep going,” he says.

“There will always be some people who want to consume music in the CD format particularly among the older generation of buyers,” concludes Rich. 

 

Written by Josh Aggars, Havaianas

Having previously worked in the music industry, Josh Aggars has an extensive knowledge of this area. Josh writes about music and a range of other topics including surfing and travel. He now follows his passion for surfing around the world and writing for travel and surf sites. 

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