Digital music report: Mobile is the future

It's official. Digital music sales are slowing worldwide, not just in the U.S., as recent SoundScan data suggests.

Global digital sales grew 6% last year to $4.6 billion, a considerably cooler pace than 12% in 2009 and 25% in 2008, according to an annual report by the London-based International Federation for the Phonographic Industry.

With digital music sales slowing worldwide, music companies are looking everywhere they can for a little extra juice. Two sources come up prominently in the report: cellphone carriers and Internet service providers.

The music industry dangled a tasty carrot. Carriers and ISPs in the U.K., for example, stand to reap as much as $103 million annually within three years of offering digital music streaming services to their subscribers, IFPI said, citing a report from European technology consulting firm Ovum. In short, labels are wooing ISPs and carriers by saying, "Together, we can make beautiful music -- and lots of money."

Why do music companies need fuddy-duddy cable and phone companies? Two words: direct billing.

Jim Rondinelli, vice president of Slacker, a San Diego-based digital music service, summarized it by saying, "That means highly visible distribution on the handset and direct billing that puts the consumer no more than two clicks away from the transaction. There is simply no substitute for that."

Another bonus of doing business with carriers is that once the service charge is tacked on to a monthly phone or cable bill, many subscribers forget that it's even there and don't cancel.

With ISPs in particular, there's an implied quid pro quo: Help us police piracy by shutting down illegal sites and cutting off infringing users, and we'll help you make money by selling our music services.

Will the music industry's love song work? Chances are, this is a good year to find out.

-- Alex Pham

Twitter.com/AlexPham

Photo: Ke$ha, whose hit single "Tik Tok," was the No. 1 digital track in 2010, according to IFPI. Credit: RCA Music Group

Comments

[anna]

So, if global digital sales grew (a mere) 6% last year to $4.6 billion, what does the $4.6 billion compare to in 2009 and 2008?

The rate of growth slows as the numbers get significantly bigger.

Last year, track sales in the U.S. were only up 1% over 2009, but the sales reached a staggering 1.172 billion (compared to 2009's track sales of 1.159 billion)

In 2006, track sales were 581.9. They shot up 45% in 2007 to 844.2 million. Yes, the growth rate of 45% is impressive (45 is definitely higher than 1), but the sales were massively lower.

[NBCTheVoiceFan]

However you look at it, it is still a heap of money to rake in. Don't forget, there is no physical process necessary anymore like before (records, CDs) so the profits are a lot higher with less overhead costs. So they still don't seem to be doing bad, do they?