The Only Way Is Up…for Music

And that’s what has been happening.  Finally.  It sure has taken a long time.  But figures now show an increase of 8.5 percent year-over-year for the first six months of 2011.  According to a report in AdAge, this puts the industry “on track to become the first full year of positive music sales since 2004.”

Dramatic Digital Sales

According to Nielsen SoundScan, it seems like it is the digital sales that are the force behind this escalation.  Digital album sales increased almost 20 percent and digital track sales, 11 percent.  But Nielsen Entertainment’s Senior VP-Analytics was somewhat surprised by this.  David Bakula told Ad Age that “sales figures were starting to plateau heading into fourth-quarter 2010.”

So what is the reason for this increase?  There have been many events that have stimulated this: for the first time, the Beatles catalog is now available for digital download; Limewire (an illegal downloading site) was shuttered; and stores such as Circuit City and some Borders locations have closed down.  It seems that these events have “given digital music sales more momentum.”  As well, in general, the public is feeling more comfortable with digital too.

Album Sale Increase

There have been substantial gains with actual album sales too: from every three albums purchased, two are CDs.  Looking at all sales (actual and digital) there has been an increase of 3.6 percent in the first half of 2011.

Some Bad News

But while this is of course great  news, there is unfortunately still some problems within the music industry.  There is still a way to go on the recovery chart.  The music industry has been enduring losses for the last seven years – with an especially tough year last year when sales dropped 2.4 percent.

However, now that there has been this substantial increase, Bakula believes “the upward trend in digital single sales…coupled with a promising fourth-quarter release slate and aggressive music-catalog promotions from shows like ‘Glee’ should even things out.”

James Cannon

About James Cannon

James Cannon is an experienced hedge fund analyst. He has served on the advisory boards for various different Fortune 500 companies as well as serving as an adjunct professor of finance. James Cannon has written for a variety of Financial Magazines both on and off line. Contact James at james[at]businessdistrict.com