Since the iTunes Store launched in 2003, digital music sales have been viewed as the music industry’s saving grace in the face of declining physical album sales and rampant online piracy. Now, with a deluge of music streaming services letting fans listen to songs for free, the digital download may be going the way of the CD and the cassette tape before it.
U.S. digital track sales decreased for the first time ever in 2013, dropping from 1.34 billion to 1.26 billion, according to Nielsen SoundScan. CD sales also continued their ongoing decline, dropping 14 percent to 165 million. Digital album sales were stable, staying at 118 million sold last year. Meanwhile the number of songs streamed through services like Spotify, YouTube and Rhapsody increased 32 percent to 118.1 billion.
The rise of streaming has been swift. Spotify just arrived on U.S. shores in the summer of 2011, but it has become a lightning rod for controversy thanks to a chorus of artists who decry that paying musicians a fraction of a cent per listen is unfair. Make no mistake, though: this model is the future. Both YouTube and Beats Electronics are planning to launch paid streaming services early this year, and the French company Deezer is expected to bring its popular service to American shores soon. Even Apple, the king of digital sales, has dipped a toe into the streaming space by launching the Pandora competitor iTunes Radio.
It’s not clear whether this shift toward streaming will help or hurt the music industry in the long run. Digital downloads were a logical continuation of the business model that generated fat profits for record labels in the heyday of physical music stores. In some cases, with no manufacturing or distribution costs involved, a hit digital album could actually be more lucrative than a physical CD. Beyonce’s new surprise album, for instance, sold almost 830,000 copies in its first three days available exclusively as a $15.99 iTunes download.