Don’t look now but it seems as though digital downloads may have already reached their peak. According to a new report from Billboard, 2012 may ultimately go down in history as the most lucrative digital download year as streaming services such as iTunes Radio, Rhapsody and Spotify will likely continue to gain in popularity and perhaps one day replace downloads completely.
Digital purchases are down across the board thus far this year and with just a couple of weeks left before we ring in the New Year, things will likely stay that way. Specifically, individual track sales are down 4.4 percent through November 24 according to Nielsen SoundScan. Track-equivalent albums are down 2.1 percent while total purchases of tracks and albums are four percent lower compared to last year.
As NPD Group analyst Russ Crupnick points out, existing weakness in catalog sales mimics what happened with CDs. Roughly eight to nine years ago, people started showing apathy about CD purchases and would only add to their collection if something really wowed them.
It’s not as if the shift was a big surprise to those in the industry. Sony Music Entertainment chairman Doug Morris told the New York Times that buying habits of music lovers are changing. Instead of buying physical records or even digital downloads, consumers are starting to prefer music on demand options from streaming services.
There’s no clear answer as to what the future holds in terms of streaming services and whether or not the business model will be sustainable. Multiple services boast millions of users each but only a fraction of them are paid subscribers. Companies will ultimately need to find a way to generate more paying subscribers or increase advertising revenue from free users, one would have to guess.