How Legal Downloads Are Killing Music Revenue

While torrent sites take the flack for illegal downloads, it seems there's another nail in music revenue - digital singles.

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We've all heard about how the music industry took a big financial hit since the likes of Napster offered free music downloads to the masses. But while it's easy to presume illegal downloading was the problem, there's another detrimental factor that has gone entirely unconsidered - legal downloads.

Following an analysis at Business Insider, could it be that legal downloads have had just as detrimental an effect on the industry? Let's take a look:

In this inflation-adjusted chart of US music revenue since 1973, there's a clear correlation between illegal music sharing and reduced revenue. Once cassette players offered a record button by the late 1970s, revenue shoots down, and there's a similar effect in 2000 when Napster went viral. No surprises there.

You'd be forgiven for assuming illegal downloads have been pushing down the digital income too. Perhaps it has been suppressing the format, though I would suggest many mainstream users opted for the convenience of iTunes rather than browse torrent sites which are relatively chaotic. But there's something more here. This chart divides total music revenue between formats:

You see, until 2009, music revenue mostly came from album sales. It's no different to selling a multi-pack product in a supermarket; it's more sales in one hit for the retailer, and the profit scales up. If you consider that a raw CD and it's packaging costs the same whether it's going to hold a single track or a full album, it's undoubtedly going to earn a label more because 12 tracks can command a much higher price than a single. This chart shows the album's revenue dominance. Bear in mind the chart stops at 2009, and we in 2011 would have a very different chart with new services like Spotify to consider:

Another easy presumption here would be how mobile revenue must be growing since everyone started getting smartphones. But it turns out it's just those profit-heavy album sales that shooting down:

While illegal downloading gave revenue the same obvious hit we saw in the first chart, it looks like consumers are buying the singles they wanted rather than the album that would otherwise come with it. It might be legal, but it's not as profitable.

Could anyone have foreseen that the convenience and flexibility of an iTunes purchase would be just another nail in the US recording industry?

Legal downloads were supposed to be a solution, but instead they've cornered consumers into buying habits that leave the industry short of revenue, which makes it harder for labels to pass on their profits. Apple and their customers might be happy with this arrangement, but the real losers here are the musicians - again.

By Tom Davenport

166 comments sorted by best / new / date

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    thegrip
    people had vinyl records, then cassettes come out with the convenience of being more compact, we were given a way to duplicate cassettes and sales fell, then they brought out cd's, we were given a way to duplicate cd's and sales fell so they put the songs available for purchase on the internet, we were given the means to download the songs for free and sales fell. right now we are just in the period between people having free access to the latest source of music, and the time they come out with the new technology with promises of 'superior' sound. or maybe they'll circle around and go back to vinyl
    SumFX
    pineaple expres wrote: we might download the whole album if there was more than 1 good song on the album.....or any half decent songs on the album....yes im looking at you bieber.
    This, but dude ripping on Beiber is lame get your own opinion and stop saying things to look cool. More to the point i think "pop" artist should really only record singles rather than albums, as Henry Rollins said "a CD thats never listened to is trash"
    sunburst steve
    although it does bring money to the company if you buy CD's but then it costs way less to the company if they just post it on like itunes and then have people get a copy of the file. but then the company wants to waste less money and so they cut costs on the staff then that hurts the music because they get cheap or not good producers and staff to help with the record and then that hurts the artists which ultimately hurt the music. let's rock out not cash out music labels/companies!!!
    imamusicadept
    darth awsome wrote: There should be an article titled "How Concern about Revenue is Killing Music"
    yes!
    Yeti60
    Firebreather01 wrote: Well this is upsetting. I thought I was doing my favorite bands a favor buy downloading their albums on itunes
    Did you read the article? You're helping your favorite artists by buying their albums... but because you have the option to buy just a song or two as well, which many people do instead of getting the whole album, sales go down for the band's music.
    Northernmight
    Funny how the sound quality keeps going down.. I mean.. Vinyl, Casette, CD, MP3.. It has been found out that listening to MP3 music actually DAMAGES YOUR BRAIN.. The whole purpose of music is to listen to.. well nice music that you like. Why the FUCK would you keep making the sound worse and worse.. Defeats the purpose of music in the first place. And by the way, **** anyone with a sharp piece of glass, who downloads music. Yea i said it! No excuse is good enough. I am a poor poor sod with a 1-room apartment, i save up, i got my priorities straight, tons of CDs, Tapes, Vinyls, you name it. There is no excuse for it, other than you being an arsehole and it being easy. Sad it is. The people who want the music are screwing over those who give them and always have given them music.
    HølyDiver
    Huh... First time I've seen an article about LEGAL downloading killing revenue. Nothing is the cause of the loss in revenue but the companies themselves. Record companies always fall behind with the times and it is apparent in history. The digital age came way to quickly for them to do dip. It isn't file-sharing, it isn't only purchasing one song, it's the fact that the record companies haven't yet come up with a new marketing strategy. They are too comfy with a tangible medium - used to play music off of - to sell. In this day and age, one does not need a compact disc, cassette, or vinyl to listen to music. They don't have to wait to hear their favorite song on the airwaves, and they surely do not have to wait until their favorite artist comes to their hometown to hear them. All one needs is access to the internet, and perhaps a device that can store and play back media. Hell, anyone could just watch youtube videos all day to get the songs they want to hear, they need not download them. The record companies should really quit their griping about their methods that haven't worked yet, and get onto coming up with a way for them to make revenue. In my opinion, I'd say the corporate world of music is on its last leg. Artists are becoming more independent and music labels are losing money off of music sales. The only viable option would be to stop throwing money into CD production, and concentrate on endorsing the band, merch, internet/download sales. I'm not saying that I would prefer that, but its the only thing I can think of at the moment that would be a solution to their "problem."
    Pukka-VCU
    bobiscool123 wrote: I have noticed several people on here who believe: "If one doesn't purchase the physical CD, then one is not a 'true' fan." This is a load of crap
    Thank you. Was about to post the same thing.
    rushpython
    thegrip wrote: people had vinyl records, then cassettes come out with the convenience of being more compact, we were given a way to duplicate cassettes and sales fell, then they brought out cd's, we were given a way to duplicate cd's and sales fell so they put the songs available for purchase on the internet, we were given the means to download the songs for free and sales fell. right now we are just in the period between people having free access to the latest source of music, and the time they come out with the new technology with promises of 'superior' sound. or maybe they'll circle around and go back to vinyl
    or just be like the evil people at apple..>.>
    Handym4n
    "True fans"... Whoever coins such terms is a poser. Who is more hardcore... The people who acquire any and all music by any means necessary so they can apply it to themselves as a human being and/or a musician OR the people who claim martyrdom in a pathetic music industry, blow all their money on worthless novelty crap, and do stupid things at concerts? I don't know about you, but I'm in my room practicing while others are out there using mud as lube at some show.
    vans1170
    do you see a trend here? one thing is dominant for about 10 years and then we move on to a new thing. not saying digital is doing as good as cds or vinyl or anything, but still. maybe it will weed out the people who do it for the money.
    VinnyChinny
    I buy albums because I have this OCD type of thing where all the songs, albums and artists have to be spelled correctly with correct capitalizing of every first letter(Basically, my music library has to look neat). As for singles...seriously? If I'm only listening to one song of your band, then it's obviously not worth it for me. Also, sign more quality musicians and I'll buy the stuff more often.
    ultimatelefty
    shikkaka wrote: Nonesta13 wrote: i already knew this was happening by common sense...i still like buying cds because they look cool piled up +1 to piled up cds. I also like having the album art. But I have assumed this was the case for a long time. It is nice to see some charts on it though.
    I like the booklets too, makes me feel closer to the band... and I feel like Im supporting them, even though it would be better to go to their concerts
    krypticguitar87
    ultimatelefty wrote: shikkaka wrote: Nonesta13 wrote: i already knew this was happening by common sense...i still like buying cds because they look cool piled up +1 to piled up cds. I also like having the album art. But I have assumed this was the case for a long time. It is nice to see some charts on it though. I like the booklets too, makes me feel closer to the band... and I feel like Im supporting them, even though it would be better to go to their concerts
    well not neccesarily, buying their album helps them pay off their recording bills, which they have to pay from their touring profits if the album sales dont cover it, so you are still helping them when you bbuy the CD...
    Scourge441
    Northernmight wrote: Funny how the sound quality keeps going down.. I mean.. Vinyl, Casette, CD, MP3.. It has been found out that listening to MP3 music actually DAMAGES YOUR BRAIN.. The whole purpose of music is to listen to.. well nice music that you like. Why the FUCK would you keep making the sound worse and worse.. Defeats the purpose of music in the first place. And by the way, **** anyone with a sharp piece of glass, who downloads music. Yea i said it! No excuse is good enough. I am a poor poor sod with a 1-room apartment, i save up, i got my priorities straight, tons of CDs, Tapes, Vinyls, you name it. There is no excuse for it, other than you being an arsehole and it being easy. Sad it is. The people who want the music are screwing over those who give them and always have given them music.
    Where to begin... 1. CDs sound better than casettes, so there goes your "the sound keeps getting worse" argument. Also, high-bitrate mp3's are indistinguishable from CD-quality audio to most people on most systems. 2. mp3s damage your brain? Riiiiight. 3. The people I know who download the most music are also the ones who buy the most music. They're also the ones who buy the most shirts and go to the most shows, which give more finanical support to the band than CD sales. Think of it this way. CDs and t-shirts both generally sell for $12-$20 each, depending on the band and region. A CD generally costs about $8 to produce, once all of the recording fees, printing costs, and other production costs (artwork, engineers, etc.) A shirt costs about $4 to print. A t-shirt sale gives the band a bigger profit margin, so most musicians would be smart to trade an album sale for a free download and a shirt sale, and leave the CDs for the purists to buy. Checked.
    krypticguitar87
    Handym4n wrote: "True fans"... Whoever coins such terms is a poser. Who is more hardcore... The people who acquire any and all music by any means necessary so they can apply it to themselves as a human being and/or a musician OR the people who claim martyrdom in a pathetic music industry, blow all their money on worthless novelty crap, and do stupid things at concerts? I don't know about you, but I'm in my room practicing while others are out there using mud as lube at some show.
    as a musicain I would say that neither is more hardcore, this is because I think I would be equally as impressed with either one being my fan. no the true hardcore fan buys the novelty stuff, goes to the show, rocks out in the mud and goes to any and all lengths to get all the music ever created by the band and applies it to their life and or musicianship....
    Handym4n
    krypticguitar87 wrote: Handym4n wrote: "True fans"... Whoever coins such terms is a poser. Who is more hardcore... The people who acquire any and all music by any means necessary so they can apply it to themselves as a human being and/or a musician OR the people who claim martyrdom in a pathetic music industry, blow all their money on worthless novelty crap, and do stupid things at concerts? I don't know about you, but I'm in my room practicing while others are out there using mud as lube at some show. as a musicain I would say that neither is more hardcore, this is because I think I would be equally as impressed with either one being my fan. no the true hardcore fan buys the novelty stuff, goes to the show, rocks out in the mud and goes to any and all lengths to get all the music ever created by the band and applies it to their life and or musicianship....
    From what I've seen, there is a stark contrast between the two options. If you're a musician, you don't really have time for the latter. Let me know if I'm wrong. If you're making an album and touring, when would you have time to do anything else? On another note, I love Buckethead... Where do you buy his albums? What are you supposed to do if he never tours around here? Are you just supposed to ignore anything he does because you're not paying for it? That doesn't seem fair at all. A lot of what I'm into isn't mainstream at all. The guys are either dead, broken up, never come around Indiana, or you can't find their albums anywhere convenient and/or for an economical price. The music industry has indeed become quite a mess in regards to making profits, but from all that I've read and heard, the people do it because they love the music.
    Morgothik
    I have bought albums for one song before and got sick of that song and found that maybe song 6 is now more interesting than song 1. I think people that only by singles are not really music lovers just casual listeners.
    avalonfour
    How many ****ing time do you idiots have to post these things? We get it. Downloads are "killing" the industry. Next?
    bobiscool123
    I have noticed several people on here who believe: "If one doesn't purchase the physical CD, then one is not a 'true' fan." This is a load of crap, and these people are clearly delusional. Continue thinking that you are better than everyone else and I will continue saving money.
    Ambush72
    has anyone ever thought that our failing economy is to blame? a people won spend money on cd'S when they have bills to pay.... also most people now just listen to singles on youtube for free, and vevo makes money on the stupid advertisements... blame vevo!!!
    themuddman
    Any true fan of any band is always gunna want the cd/vinyl over a download, no matter the price, thats why we buy shirts, hats, posters, tab books, dvds, books (Biographys ect.), watches and sometimes even shoes that bear the image or logo of our favorite bands cause we built such a strong connection with them, we want as much stuff from them as we can get. if you only get the downloads, dont fool yourself your not a true fan yet... you may like their music, but your not a true fan, you havent felt the music as much as the rest of us
    insurgentsteve
    See, even CD sales took a slide after 2000. And after 2000 you had the beginning of the shitty economy after 9-11-01. There also wasn't much good music to be excited about since 2000. Maybe a spot here and there, but so many bands that are with us today were peaking around this time.
    insurgentsteve
    Nevermind, I guess napster and kazaa were peaking around this time too, I wish I could delete.
    Pr1cK
    GRAPH-CHARTS?! F- THIS, I'm GONNA GO STEAL SOME MORE MUSIC. SUCKAS. \m/
    thedevil
    all we need now is for Al Gore to make a powerpoint "documentary" and we'll have a benefit for music. featuring Justin Bieber
    Bananafish003
    edgeyyz wrote: SumFX wrote: pineaple expres wrote: we might download the whole album if there was more than 1 good song on the album.....or any half decent songs on the album....yes im looking at you bieber. This, but dude ripping on Beiber is lame get your own opinion and stop saying things to look cool. More to the point i think "pop" artist should really only record singles rather than albums, as Henry Rollins said "a CD thats never listened to is trash"Agreed, I think that albums should be made by artists who want to spread their focus or are more creative/differentiating, and singles should be made by those who put focus in less or aren't capable of making an album without filler.
    I agree with you all on this, but the big reason why none of it works is that creativity doesn't sell, catchy pop music sells. If pop artists stopped making albums and only released singles, we would see an even bigger gap between album and single sales. Meanwhile, the real albums being made would be largely ignored, since the public doesn't care about bands that think they have original ideas.
    PMAC01
    F*** all this BS. "I buy CD's" or "Musicians are being hurt". I swear... Also, can these guys make a more obviously biased and propagandized article? You know what should really happen? Everyone should let go of their pride and their precious "albums", and help this digital revolution end the stranglehold that record companies have, not only on profits but on everyone's favorite musicians. Maybe then we won't have to hear all the same crap get popular and music will evolve and be more creative.
    Black Revolver
    People are forgetting its down to the consumers as well, we can't all point the finger at the labels. If you respect the artists you listen to & enjoy their music then you should pay for that music. At the end of the day your stealing from the bands that you moan are getting no money from the record companies, which makes you no better. Even if its a small percentage that they recieve from record sales, doesn't mean it's ok to not give anything at all.
    archangels
    Once cassette players offered a record button by the late 1970s
    What? Are you really trying to blame a dip in sales on the invention of a frickin' "Record" button? That's ridiculous. I defy anyone to find some sort of proof to back that up.
    Family Reunion
    thegrip wrote: people had vinyl records, then cassettes come out with the convenience of being more compact, we were given a way to duplicate cassettes and sales fell, then they brought out cd's, we were given a way to duplicate cd's and sales fell so they put the songs available for purchase on the internet, we were given the means to download the songs for free and sales fell. right now we are just in the period between people having free access to the latest source of music, and the time they come out with the new technology with promises of 'superior' sound. or maybe they'll circle around and go back to vinyl
    What could be more simple than digital? Yeah, Vinyl times were awesome, still have the original Hendrix Axis: Bold as Love record passed down from my dad.
    GodzillaDeth
    people complain that music is too expensive these days and the only way they can get music is by downloading. those people are just lazy back in the day, people worked to buying albums, thats what real music fans do
    hippogasmo
    Skarson wrote: this is actually a good thing for music lovers, as it can serve as a sort of quality control (whereas in the 90s an entire album of filler could sell well from the momentum of one hit single). and yes, it's the record companies, not the musicians, who are really suffering here. this is just pushing us closer to the collapse of the record companies which, in this technological era, is not necessarily a bad thing for musicians.
    It's a bad thing for musicians because without the backing power of a label, it's hard for good bands to get much exposure outside of their local market. It's also nearly impossible to make a living as a musician without having to find other work to supplement income.
    sludgegarden69
    Just curious, since I'm a young folk... Did people in the 90s bring up Vanilla Ice in EVERY SINGLE conversation about how bad music is nowadays? And in the 80s, did they mention Paula Abdul in those conversations? Because the "Bieber" motif I'm seeing is getting almost as irritating as the kid's music. Let's all hate Ke-dollarsign-ha instead. Or talk about music that we DO like.
    LedFender
    this is where bands like Zeppelin had it right. hardly any singles so that people were forced to buy an entire album. i believe in this. instead of being able to buy specific songs, buying an entire album is much more profitable. plus if you look at today's industry, i hear kids all the time that have 1 or 2 songs from different artists. instead of like me, i have entire albums. idk but it also all boils down to the fact that the music that people put out now is just... washed out crap. theres no variety, theres nothing different out there.
    Spychosis
    21wickwing wrote: thumbdrive...and download music rescue...although the whole restricting computers thing is ridiculous...they should get rid of that. only 5 computers...what happens 5 laptops down the road? I should be able to get rid of computers or something.
    You can get rid of computers. You can add/remove any computer from your list of 5 comps per iTunes account.(at least you used to.. stopped using iTunes after they made the store use more memory and removed direct AAC to MP3 conversion)
    saalkin wrote: ...For example look at gaming, mainly PC gaming. Which has a really high piracy rate. Now if you look at current trends the piracy rate has been going down the last few years. Why? Many companies started to properly support their PC titles and make quality products.
    Ehh.. PC games have gotten WORSE recently because pirating is easier on PC than consoles and more people buy console versions-- so companies focus on consoles. Crysis 2 is not PC exclusive you know! -Now all of this industry stuff was predicted by Pink Floyd and the like, who sued Apple to only allow albums on iTunes. Apple should make only official singles and albums downloadable, nothing inbetween. Problem solved.
    M3lodeath
    Lol only the record companies are suffering the band gets most its money from touring the album sales benefit the musicians a little bit but not that much. the main purpose of album sales is to attract new fans. So in a way illegal downloading helps the musicians but screws the record company. Legal downloading screws the record company also because they'll only download one song rather than the entire album.
    a7x4life666
    hippogasmo wrote: Skarson wrote: this is actually a good thing for music lovers, as it can serve as a sort of quality control (whereas in the 90s an entire album of filler could sell well from the momentum of one hit single). and yes, it's the record companies, not the musicians, who are really suffering here. this is just pushing us closer to the collapse of the record companies which, in this technological era, is not necessarily a bad thing for musicians. It's a bad thing for musicians because without the backing power of a label, it's hard for good bands to get much exposure outside of their local market. It's also nearly impossible to make a living as a musician without having to find other work to supplement income.
    I agree with Skarson. Record companies never did anything except give bands a place to record, get them noticed, and leech off of their money. Now, bands don't need them because there are cheap programs that can do more than any label company could a few decades ago. Also, there's a little thing called the Internet, you might have heard of it, that is a great place to get bands out there, and could easily fill the vacuum that labels will leave.
    krypticguitar87
    Handym4n wrote: krypticguitar87 wrote: Handym4n wrote: "True fans"... Whoever coins such terms is a poser. Who is more hardcore... The people who acquire any and all music by any means necessary so they can apply it to themselves as a human being and/or a musician OR the people who claim martyrdom in a pathetic music industry, blow all their money on worthless novelty crap, and do stupid things at concerts? I don't know about you, but I'm in my room practicing while others are out there using mud as lube at some show. as a musicain I would say that neither is more hardcore, this is because I think I would be equally as impressed with either one being my fan. no the true hardcore fan buys the novelty stuff, goes to the show, rocks out in the mud and goes to any and all lengths to get all the music ever created by the band and applies it to their life and or musicianship.... From what I've seen, there is a stark contrast between the two options. If you're a musician, you don't really have time for the latter. Let me know if I'm wrong. If you're making an album and touring, when would you have time to do anything else? On another note, I love Buckethead... Where do you buy his albums? What are you supposed to do if he never tours around here? Are you just supposed to ignore anything he does because you're not paying for it? That doesn't seem fair at all. A lot of what I'm into isn't mainstream at all. The guys are either dead, broken up, never come around Indiana, or you can't find their albums anywhere convenient and/or for an economical price. The music industry has indeed become quite a mess in regards to making profits, but from all that I've read and heard, the people do it because they love the music.
    I go to concerts all the time and so do many of theo other musicians that I know.... no I don't have any tours coming up, but I hardly accept that as an excuse. but your buckethead example doesn't prove a point, if you can't go to the shows you can't that doesn't make you less of a fan and if he isn't selling things for you to buy, that also doesn't make you less of a fan, but sorry to say it someone who does go to see their favorite badn and buys all their merch, how is he less of a fan than you are of buckethead? look just because you can't really go out and do all the things that other fans might doesn't make you less of a fan but there are people I know who have gone to see metalica ten fifteen even twenty times and buy the merch and listen to their music religeously and have hard to find performances like bootleged things from their early years and learn to play most of the songs on their respective instrument and play in bands... I would definately call them much more hardcore fans than the guy that learns how to play all the songs.... obviously someone who is obsessed with hendrix cant go see him live, and they can be hardcore fans too, but to say that hardcore fans could only be defined as either "go to great lenghts to get all the music" or "an idiot that supports the musician/band" is rediculous.
    Yeti60
    Morgothik wrote: I have bought albums for one song before and got sick of that song and found that maybe song 6 is now more interesting than song 1. I think people that only by singles are not really music lovers just casual listeners.
    Agreed. I buy into the notion that music is made as an album and should therefore be bought/downloaded and, more importantly, LISTENED as a whole album (at least the first go around).
    Shoegaze
    The music industry may be dying, but music itself will never die. That's all that matters.
    LordBerly666
    such a long story.. by the way, I just noticed that up to 70% of this page is not the article itself. But, the comments LOL
    Livingtime
    This isn't very...inspiring. What am I supposed to do if I can't find a CD at the shop, I can't buy one on the websites I have no credit card or anything like that. So what am I supposed to do?
    Shaggy91
    Jasoncow wrote: ChucklesMginty wrote: Mginty's law: As an online discussion grows longer, the probability of a comparison involving Justin Bieber approaches 1. This!
    +2
    EpsilonJSTC
    SumFX wrote: More to the point i think "pop" artist should really only record singles rather than albums, as Henry Rollins said "a CD thats never listened to is trash"
    QFT
    Wall_of_sound
    thegrip wrote: or maybe they'll circle around and go back to vinyl
    Oh the sweet crackle of vinyl!! If only.....