Digital Music Sales - Tumblr Posts
Signaling the strength of Internet and satellite radio, SoundExchange paid out a record $149 million to record labels and artists in the second quarter of 2013, 55% increase over the same period in 2012. SoundExchange is the non-profit organization that collects performance royalties from digital music services and distributes them to record labels, performing artists and non-performing artists. Services that use compulsory license established by U.S. copyright law -- Pandora, SiriusXM, iHeartRadio et al. -- pay to SoundExchange. “SoundExchange’s most recent distribution is yet another positive indication of where the industry is heading, said Michael Huppe, president and CEO, SoundExchange, in a statement. He added that SoundExchange's 4.9% administrative fee for 2012, down from 5.2% in 2011, put more money into owners' and creators' pockets. The organization takes the fee before distributing money to labels and performers. The size and growth in SoundExchange payments underlies the current public debate over performance royalties. The most recent $149 million distribution was preceded by distributions of $117.5 million, $134.9 and $122.5 million in the first quarter, fourth quarter and third quarter, respectively. That's a total of $523.9 million over the last four quarters. Distributions have grown considerably since the second half of 2011 when SoundExchange doled out $88 million and $89.5 million in the third and fourth quarters, respectively.
Even though iPad sales stumbled in the third quarter, Apple Inc.'s iTunes store continued to rock on, according to the company latest earnings report released Tuesday.
The iTunes store "generated record billings of $4.3 billion in the June quarter, culminating in our best month and best week ever for App store billings at the very end of the quarter," Apple Chief Financial Officer Peter Oppenheimer said in a call with analysts. Those gross billings, which includes money passed through to developers as well as Apple's cut, translated to net quarterly revenue of $2.4 billion for Apple, up 29% from the year ago quarter, Oppenheimer said.
Oppenheimer credited movies, TV shows and apps for the uptick, saying iTunes customers downloaded more than 1 billion TV episodes and 390 million movies to date. They're currently downloading more than 800,000 TV episodes and 350,000 movies every day.
As for the five-year-old App Store, Apple disclosed that developers have created more than 900,000 iOS apps thus far, including 375,000 apps designed specifically for the iPad.
"The popularity of these apps remains incredibly strong," Oppenheimer said in a conference call with analysts to discuss the company's third quarter earnings. "Downloads have surpassed 50 billion. and app developers have made over $11 billion from their sales of the App Store -- half of which was earned in the last four quarters."
The message is clear: For iTunes, the money is shifting towards video and apps, diluting its former reliance on music, as Apple expands its array of digital content offerings. That's not necessarily bad news for the music industry, which has also diversified its product lineup to include apps, games and videos in which music is a primary element.
Apple Chief Executive Tim Cook also presented another spot of good news for the industry. Although iPad sales dropped 14% in the quarter, Cook said he belived both tablets and smart phones have further room to grow, particularly in overseas markets. Both types of mobile devices are key drivers of music and media consumption.
Another potential platform for media consumption is the automobile, which Cook viewed as "part of the ecosystem."
"Having something in the automobile is very, very important," Cook said. "Apple can do it in a unique way, and better than anyone else. It’s a key focus for us."
When it came to products that Apple may be working on -- whether it's a watch, a new Apple TV or an integration with car manufacturers -- Cook refused to tip his hand, declining to answer analysts' questions on upcoming releases.
Digital download sales are likely to increase again in 2013. But by one measure, downloads actually peaked in 2011. Download sales accounted for 73% of digital revenues in 2011 and fell to 70% last year, according to annual shipments tracked by the Recording Industry Association of America (RIAA). Not that download sales have declined over the years. Track and digital album sales have each grown every year since the RIAA began reporting them in 2004. As a percent of total revenue -- counting both physical and digital revenue as well as synchronization royalties -- download sales rose to 40% from 36% in 2011; 31% in 2010; and 24% in 2009. Nor have download sales declined in dollars. In fact, annual download sales continue to grow each year. Track and album sales grew by $235 million last year and gained a combined $912 million in the three-year period of 2010 through 2012. Download revenue is likely to grow again in 2013 by very low single digits. Yet new business models are eating into downloads' dominance. Services such as Spotify, Pandora and SiriusXM grew by $405 million in 2012 and $1.22 billion in the three-year period of 2010 through 2012 -- both much higher than downloads' gains. Another key factor: download sales growth has almost stalled this year after years of double-digit gains. But downloads' grip on digital revenues will ease over time because subscription and streaming services are experiencing high growth rates. Subscription and streaming services grew by 69% and 59% in 2011 and 2012, respectively. Royalties from services that pay royalties to SoundExchange -- such as Pandora, iHeartRadio and SiriusXM -- grew by 58% last year. The market is clearly shifting toward streaming services. The numbers suggest we may be beyond the tipping point.