Last month, I discussed the troubles companies have driving revenues through online music services. Sonific had shut down and Snocap was sold to Imeem for what was rumored to be fire-sale prices. On Friday, the Pew Center for Internet Research provided some data that may explain some of the trouble these folks are having.
The Pew report cites an ABC news story pointing to the crux of the problem:
"Shipments of CDs peaked at 942.5 million units in 2000 and fell by 25% to 705 million units in 2005. Figures released earlier this year show that album sales fell by 9.5% in 2007, even though digital sales grew by 45% in this period." (
Alex Veiga, U.S. Album Sales Down, Digital Up. Associated Press, January 8, 2008. Available online at: http://abcnews.go.com/Business/wireStory?id=4081901. Accessed on May 8, 2008. 
Among internet users who research the music they buy online, their methods are varied (picture left), but only 32% of those who said they used music said their online research was definitive in making their purchasing decision. In order, the top 5 effects of online music research were:
- Learn more about the band
- Learn about new artists
- Save money on music purchases
- Buy more music than was planned
- Changed their mind about the artist or song they were going to purchase.
By and large, it is offline influences that continue to drive the music purchasing decision according to the survey data.
Now, the 70+% of users who say that friends and family are impactful in driving their music purchases could certainly include folks interacting on social networking sites like Facebook or MySpace. Applications such as iLike on Facebook that allows friends to dedicate songs to others can be source of new music.
Activities for online music research are also varied, and certainly skewed towards the younger generation. The Pew Center caveats this report with the fact that litigation fears may drive many people to not respond in the positive to the question of whether or not they download music.
Given the large concentration of offline influences and purchases, it becomes more understandable why a fragmented strategy towards digital content sales may not drive the fortunes of many companies and the benefits continue to be concentrated in the likes of iTunes and Amazon. However, Apple's recent success in surpassing WalMart in music sales is evidence that more sales may move to digital. In the meantime, it will be interesting to see how the content vs. free advertising-supported listening shakes out. It's not likely to resolve itself in the same timeframe as BluRay vs. HD DVD.
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