The Download Hits Middle Age (and It Shows)

The slow but steady rise of on-demand services like Spotify and Rdio coincided with a drop-off in sales for various download fomats.

The digital download hit middle age in 2013. Although retirement may be far in the future, the download is getting pushed aside as consumers opt to experience music in other ways.

Digital purchases are down almost across the board this year. Track sales are down 4.4% through Nov. 24, according to Nielsen SoundScan. Track-equivalent albums, where 10 tracks equal one album, are down 2.1%. Total digital purchases -- tracks and digital albums -- are down 4%.

Track sales have been falling all year. In the first half of 2013, U.S. consumers bought between 23 million and 25 million tracks per week. In October and November, weekly track sales dropped below 20 million.

Only digital albums are in positive territory, but those gains are quickly eroding. Through Nov. 24, digital albums are up 0.5%, but that small improvement looks much worse when one considers digital albums were up 14% in 2012, 10% at the end of the first quarter and 6% at the midway point of 2013.

A lack of hit singles or a subpar album-release schedule usually gets blamed for weak sales. That hasn’t been the case in 2013, although this year’s top sellers sold slightly less than last year’s. Robin Thicke’s “Blurred Lines,” this year’s top track with 6 million units sold, is about 200,000 units behind last year’s top seller, Gotye’s “Somebody That I Used to Know.” This year’s No. 2 seller, Imagine Dragons’ “Radioactive,” is about 900,000 units behind its 2012 counterpart, Carly Rae Jepsen’s “Call Me Maybe.”

People like easy explanations for complex issues. Unfortunately, no one factor can explain the shift in download sales. The reason for the drop-off is a web of interrelated stories that show new technologies affecting consumer behavior.

One obvious factor is weakness in catalog sales. Through Nov. 17, current digital albums are up 5% while catalog digital albums are down 2%. A similar gap exists in track sales. Current tracks are even with last year, while catalog tracks are down 8%. Those spreads didn’t exist in prior years, Nielsen Entertainment senior VP David Bakula says.

Streaming services are changing the trajectory of digital sales. Millions of Americans now subscribe to an on-demand subscription service like Spotify or Muve Music. Millions more use the free versions of Spotify and Rdio.

The shift to streaming could hurt catalog sales more than current sales. According to an analysis of Nielsen sales and streaming data through mid-September, the top 500 track sales make up 31.5% of total track sales, while the top 500 streaming songs make up only 14.5% of total streams. Since catalog music accounts for a larger share of track sales, they’ll become more vulnerable to a decline as the business moves to streaming.

The current weakness in catalog sales mimics what happened with CDs, according to NPD Group analyst Russ Crupnick, who says consumers began showing “apathy” about CD purchases roughly eight to nine years ago. “People were starting to say, ‘I’m good. I have all the catalog I want. If you don’t ‘wow’ me with something new, I’m going to stay on the sidelines.’”

It’s not a coincidence that the download is facing the CD’s past struggles. A music format’s appeal doesn’t last forever. The cassette peaked in 1989 and the LP reached its apex in 1980, according to the RIAA. The cassette single’s 14-year life span peaked in 1993. The Super Audio CD’s best year was its first, in 2003. A decade after the launch of iTunes, the download is being replaced by a laundry list of online alternatives. “Consumption,” Nielsen’s Bakula says, “is changing and fragmenting.”