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Right on Cue

On February 6th, 2013 Apple reported that a total of 25 billion songs had been downloaded from its iTunes music store. The previous definitive value was in October 2011 though there was mention of “more than 20 billion” in November. App download totals have recently been much more frequently updated as the following chart shows:

Screen Shot 2013-02-12 at 2-12-2.17.06 PM

[I estimated 21 billion for the November total.]

The latest two data points point to a surge in iTunes song download rates. Prior to last fall the download rate seemed to be hovering around 10 million songs per day.

Screen Shot 2013-02-12 at 2-12-2.20.10 PM

The new data implies that the rate may be now perhaps 20 million per day however I would be cautious about this estimate given the latest point being such an outlier. One reason for the surge might be the opening of new stores in previously unserved countries. Another could be the usual post-holiday surge driven by gift cards.

Given this data, it would be interesting to calculate the share of overall music downloads that iTunes has been able to secure.

Based on the samples offered by Apple, and the data from International Federation of the Phonographic Industry (IFPI) we can estimate that in 2011 iTunes captured 90% of digital music revenues and 31% of the total music industry. (I estimate iTunes was responsible for about 4.3 billion downloads and I applied a price per download of $1.1).

Looking to 2012, applying a growth rate of 8% to digital sales (same as that of 2011) and an 8% decline in the physical business (vs. 8.7% decline for 2011) we get 98% iTunes share for digital and 37% share for all music. (I estimate that iTunes was responsible for about 5 billion downloads and I applied a price per download of $1.1).

Therefore it seems reasonable to estimate that Apple will reach 97% share for iTunes music in 2013. That assumes a 10% growth in the music download business and translates into 5.5 billion downloads or about 15 million songs per day. That’s well within the trajectory seen above.

These data result in the following market overview:

Screen Shot 2013-02-12 at 2-12-2.21.25 PM

Comments

27 Comments so far. Leave a comment below.
  1. Pete Austin,

    Music sales != total music industry. There are concerts, license fees etc.

    • twilightmoon,

      For the labels that’s most of their revenue, the concert money typically goes to the artists. The labels also make money from licensing.

      • Walt French,

        I’m a big fan of live performances when my schedule permits, but when I look around the room (I love jazz but it ain’t so popular), I wonder how the world- or national-class artists even covered their travel costs. For less well-known acts, I can’t imagine.

        Presumably, while the labels collect license fees, a fair fraction of that goes to the artists without whom the labels have no reason to exist. (And furthermore, at least in theory a new label could pop up and promise new artists a higher net—drawing away business from existing labels that overcharge for what they do for artists.)

        Do you know the fraction of license revenues that typically end up in artists’ hands, and the total dollars to pop musicians that come from licensing vs concerts? Methinks this data suggests that all but the superstars are pretty dependent on iTunes.

      • Ted_T,

        In a recent NPR interview Aimee Mann said that touring for her is a break even proposition and she depends on record sales.

        Jazz must be a very different animal: record sales tend to be fairly tiny, but for those that are big enough, a week at a top flight jazz club in NY, LA, Chicago and maybe New Orleans plus Tours in Japan and Europe, where they tend to be far more appreciated is where the money is. Add some one of concerts at festivals and in college towns. For lesser know jazz musicians, often it is just concerts in NYC where many live plus tours in Europe/Japan. I don’t think there are many jazz musicians (I am excluding crossover types like Alicia Keys — think Ron Carter) will go on a domestic tour in the same manner a rock band would — jazz doesn’t play in Podunk, rock may.

      • LTMP,

        I was lucky enough to meet Holly Cole on a flight from Toronto to Seattle. She was kicking of a tour. She was in first class and the rest of the band and her manager were flying coach.

        She was nice enough to comp me tickets to her show in Seattle. It was completely packed at $40 a pop (IIRC) with maybe 300 in attendance. I doubt that her cut even paid for her first class ticket.

        However, I bought a dozen CDs, and it looked like most people were buying two or three. Perhaps the combination of ticket and CD sales turns a profit.

      • the biggest acts spend the most on marketing and publicity. and you need a big partner to lend you money for touring costs. figure $100 average ticket price for a 20,000 seat venue. $20,000,000 in potential revenue. no bank will process the credit card charges without some kind of bond.

        i’ve never listened to Widespread Panic but years ago they had a segment about them on CNBC and said they earned more money than almost every other music act. and they did it touring smaller venues.

      • ChKen,

        Ages ago, when U2 was doing their Zooropa tour, I recall reading something about how U2 lost money on the tour, given the elaborate stage set. I suppose they made it up on CD sales, and running their royalties thru the Double Dutch and Irish Sandwich.

      • dajhilton,

        Depends what kind of ‘licensing’ revenues you are talking about. Traditionally, all licensing income, as it is usually understood in the music business (ie, income from public performances of sound recordings) was split 50/50 between the record label and the recording artist(s). But since there is no public performance right for sound recordings in the USA (except for digital transmissions), that income has always been viewed as secondary. In Europe and Asia, Canada and Australia, it has been, and remains, significant money. And jazz is very popular in those territories. There the split is also likely to be 50/50, and in the European Union the artist gets paid by law, regardless of what deal he cut with his record company. (He’s entitled to ‘equitable remuneration’).

        If however you include synchronization income and all other revenues from using music in derivative works like films, tv shows, and advertisements in the concept of ‘licensing’ revenues, that is very significant money, but it tends to arise only occasionally and is fundamentally unpredictable.

        Example: the income realized just by using the Bobby Darin hit ‘Beyond the Sea’ in the recent Kevin Spacey film (an example of synchronization income) would, I estimate, likely exceed all of the licensing income that that track would have earned in the past 50 years since it was released. We know for sure that for every time it was played on the radio in the US since the 1950’s, and for every time it was played in a bar, restaurant, or dance hall, the recording earned $ 0 in licensing income over that time period.

        And as for collecting the licensing income, that is not done directly by the record labels. It is predominantly done by ‘collecting societies’, as the name suggests: SoundExchange for digital royalties in the US; PPL in the UK, SNEP in France; IFPI in Asia. It’s a big business, jointly controlled by boards that tend to have equal representation from artist representatives and record label representatives.

    • JohnDoey,

      On the whole, I think you will find that concerts are negative income. Only a select few artists make money from touring. For most it is break-even or a loss.

      The entire music industry is only something like $10 billion per year these days. There is just almost no money in the music industry.

  2. do the app download numbers draw a distinction between purchases and updates? for instance, i download lots of apps: updates to apps i already own.

  3. The steepness of the Apps downloaded is obviously due to free apps being available, whereas each song is 99¢. We know that Apple has paid out $7B to developers — $10B in revenue to date. Looking at the graph above, we can see that Apple has grossed twice as much with apps for the same number of weeks after launch as it has with music (assuming albums and movies and rentals that exist on the iTunes Store do not count as just one data point).

    Assuming my premises are correct — what does the revenue per device on the market look like?

  4. DarelRex,

    Great article, but why is the second-to-the-last blue dot at about 23 million in the first graph, but only 20 million in the second graph? :) No biggie.

    • Thanks for noticing the error. I had changed my estimate from 20 to 21 and the data was hand-entered rather than referenced in the second graph. I had initially gone with 20 which what was reported in the AC/DC press release but decided to alter it to 21 as it was “more than 20″ and the increase from 20 to 25 in a little over two months seemed far fetched.

  5. cellojoe,

    Is there any sign that streaming services areretarding the growth of iTunes? Thoughts on this going forward? I would actually tenfto think that they might be complementary at least for a while. Consumers like owning products. Is there any data that suggests that Pandora might be a showroom for iTunes?

    • handleym,

      I’d love to see data on this as well.
      Personally I see no attraction in streaming on the desktop, and view streaming to mobile devices as positively idiotic. But there is, of course, an EXTREMELY vocal faction on the internet that insists otherwise; and I have absolutely no idea which of these two extreme opinions is more representative.

      I’ve never seen data on the subject beyond the usual “I like streaming therefore it is obviously super-popular, and anyone who disagrees with me is a fool”.

  6. LRLee,

    I think the title of this piece is very clever. And hey people who love Horace’s work, look over there on the right! There’s a DONATE button! Just saying.

  7. Watcher,

    Maybe the increase in downloads is explained by iTunes match? Was it introduced in more countries recently?

  8. Where do Android users get their music, I wonder?

    • iTunes, Amazon and Google play. I am amazed at the number of people I see with an Android handset using an iPod for media.

      • Right, the above chart makes digital music sales from Amazon and Google Play look pretty miniscule. So they’re either buying from iTunes, buying physical media, or not buying at all. (And I realize there are also streaming services that may meet the needs of a large number of users.)

  9. Johan,

    What about all the on-demand streaming services? Pandora – which reached about $400 million in annual revenues in 2012 (calender year) – may be a little different since it’s more like radio, but Spotify, Rdio, Wimp and Nokia Musik come to mind. Hardly successful businesses yet since they’re burdened with high licensee costs, but Spotify recorded $244 million in revenues for 2011 which grew to $ 400 – 500 million in 2012, about 8% of iTunes’ revenues in 2012.

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