The music industry is grappling with a new front in its war on piracy -- the smartphone.


The music industry is grappling with a new front in its war on piracy — the smartphone.


Digital music downloads are down. Music streaming is up.

Connected? That’s a big debate within the music industry right now, and the truth is that there probably isn’t a straightforward answer. But it’s reasonable to conclude that at least some of the drop in sales comes as people are increasingly relying on services that serve up what are essentially unlimited streams of music, like YouTube, Pandora and Spotify.

For now, we can at least agree on some basic facts:

Digital music sales decreased last year. Individual track sales were down around six percent in the U.S. Sales of digital albums — Beyonce included — were flat, according to Nielsen Soundscan. That’s the first time digital download sales have decreased.

Digital music streaming increased last year. Nielsen says listeners streamed 118 billion songs last year — up 32 percent from 2012. Those numbers significantly undercount the total impact of streaming, since they don’t count some Web radio services, most notably Pandora, whose users listened to 1.58 billion hours of stuff in December alone.

The real question for the music business — and people who make music — is whether the money they’re getting from the streaming services is making up for the drop in downloads. We might get a slightly better sense of that in the nearish future, when industry trade groups plan to release numbers on the streaming market, but again — it’s going to be murky.

For the record, here’s the most popular digital download of the year. Alan Thicke’s son, with a lot of help from Pharrell (and maybe Marvin Gaye), sold 6.5 million copies of this one:

And here’s the most popular stream. Remember the Harlem Shake? From less than a year ago?  489,674,000 streams:


Like movie studios getting stingy with Netflix, music producers should do the same with music streamers.  Of course, I'm a guy who doesn't mind buying a digital album, actually prefers to.

I keep my collection in SkyDrive.  Strangely, Microsoft makes it complicated to copy music files from SkyDrive to the music folder on my Windows Phone. Kind of strange if you ask me but that's Microsoft.


It seems to me that the digital download business will become a thing of the past because of a lack of external storage support on mobile devices. Everyone talks about a post-PC era where people have replaced their PC usage with phones and tablets. However, Apple's iPhones and iPads (as well as numerous other manufacturers' devices) do not allow for external storage (no SD cards and USB drives). Many people have 16 GB models because they are cheaper. Most people who rely exclusively on mobile devices will have nowhere to store their digital libraries locally.

Therefore, when you purchase a song or movie, all you are really doing is purchasing a bookmark that you can stream on-demand. But why do that when there are on-demand streaming services that will provide you with unlimited bookmarks?

Just as Apple is credited with making the digital download business successful, Apple may be equally credited with its demise due to their restrictive storage policy and premium pricing on large-memory devices. But when the digital download business dries up, Apple may simply move into offering an on-demand service as well. They are already on their way to doing so with iTunes Match.


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