digitalsales

Data and images courtesy Mint.com.

Mint.com, the online financial management tool, has put its numbers together with market researchers NPD Group to analyze music spending. The results: when it comes to consuming recorded music, digital music continues to rise. At the same time, so does Apple’s grip on the music consumption market, a combination that includes proprietary control of a music store, a music player, and the leading mobile device.

marketshare

The NPD data should look familiar. Digital music is growing, and clearly it’s at the root of the record industry’s loss of revenue as consumers shift from physical to digital media. Also, Apple’s iTunes remains the lion’s share of the market – enough so that they effectively control distribution, pricing, and consumption patterns, the very definition of monopoly by most measures. (That’s even before you get to Apple’s effective monopoly over the computer player and mobile device, though my suspicion is that an all-out attack on the portable device could start to chisel away at all three.)

Even in the NPD data, though, there’s an interesting indicator: note that the “Other” category is roughly the same size as Apple’s main competitors. That suggests that there’s a plurality minority. And oddly enough, it’s right in the middle of this mysterious “Other” category that a lot of unknown music artists make their dollars, selling direct to listeners or going through niche sites. Artists I’ve talked to in the electronic genre have almost universally said they make nothing on Apple, while they do very well on a site like electronic-specific Beatport. And unlike physical media, it’s not a big deal for someone who loves electronic music to drop their favorite tunes manually from the Beatport store into iTunes and an iPhone.

Dig into the Mint.com numbers, and you see just how different stores can be. Per-transaction spending differs by an enormous margin. Brick-and-mortar retailers sell a lot more per transaction. True, this could include accessories like headphones at stores like Sam Goody, but it’s also interesting to note the gap between stores like eMusic, Rhapsody, and CD Baby, and the smaller per-transaction buy at iTunes.
spendper

While Apple buyers aren’t spending as much per visit, they’re visiting more often, and Apple’s move to variable has made a big difference. Buyers have gone from purchasing an average of 2-2.5 transactions to well over 3, coinciding with the introduction of variable pricing.

transperuser

If you’re not a fan of monopolies, there’s just not much to be done to spin this data. As digital consumption has grown by an order of magnitude, nothing has happened – thus far – to change Apple’s dominant share of the market. And as you can see in pricing statistics, within the Apple ecosystem, Apple has been enormously effective in controlling the pricing of the product and spending habits of the consumers.

On the other hand, looking at the inverse situation, a lot of the most interesting activity is happening outside either the former brick-and-mortar or new digital iTunes economies. We don’t have data on a lot of these niche stores (Dancetracks, Beatport, Bleep, and so on), which grow in number and variety. We don’t have data on direct-to-consumer sales by artists. And we don’t have much data on legal free music consumption, music released as Creative Commons or pay-what-you-will. Just criticizing Apple for their popularity could miss out on what’s happening in these alternative channels.

Many of these channels have no obligation to share their statistics, but to any who are interested, I’d love to talk to you. (And I think CD Baby winds up being the most interesting stat here.)

This is also an excellent illustration of what online analytics can do with financial data. It certainly won’t ease anyone who prefers that this data remain private, but fans of analytics might also see potential for collective learning experiences from shared data. Data like this had long been privileged only to banks and credit cards; a service like Mint allows users to share such data with one another.

So, how are you spending on music?

And would you find it useful – or disturbing – to have that kind of data shared anonymously with other consumers?

  • low resolution sunse

    This is pure conjecture: but I tend to think that slick interface design, trust, and loyalty for the Apple brand identity is what's winning them the dominant market share of downloads.

    It took me forever to start buying from other online music retailers, and I (like all of the CDM audience) am a savvy consumer of technology and digital goods.

    In the interest of disclosure, I do own an iMac and an iPod touch, so Apple's product integration probably also contributes to my spending habits.

  • http://mrbiggs.com Brian

    I guess I'm surprised that the majority of buyers still buy CD's or "Physical" music. Where are they buying these CD's? Amazon? Every record store I knew of six years ago has gone out of business. Are Walmart and Target really selling that much?

  • gwenhwyfaer

    Hmm. They're using an Applesque ring thingy for their bar chart. I recognise it instantly, despite never having owned an iPod. I think I'd say that when your product's distinguishing feature becomes shorthand for your whole market sector, you can probably legitimately be accused of dominating it…

    Nonetheless, before I accept the term "monopoly", I think I'd like to see some evidence of Apple using their market power to lock out competitors, rather than to drive down the prices they pay themselves. For instance, offering a higher share of revenue to record companies who agree to supply them exclusively, that kind of thing. Now, I'm not saying such evidence doesn't exist – just that it's the kind of thing which makes the difference between natural dominance and monopoly (cf. Microsoft).

  • http://microsong.blogspot.com Dan Gillespie

    Maybe I'm missing it, but I don't see anything in this data that suggests that digital consumption has grown, just that it's grown relative to physical consumption. Could that be simply that physical consumption is falling, or am I missing a piece of data.

    Similarly, while people tend to spend 2 to 3 times less money per transaction on itunes when compared with other digital distributers, it seems that they make closer to 3 times as many transactions. So I'm not sure this is actually a significant difference between the various stores.

    What I'd most like to see, however, is evidence that people are spending more on digital music than they used to. Was that question covered by the Mint.com study?

    Dan

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  • bLcKtRsH

    it's not the innovator's fault.

  • http://www.createdigitalmusic.com Peter Kirn

    @Dan: Yeah, I'm curious about that, too. Those numbers should show up in Mint, so I'll ask.

    And generally, while obviously the trend continues toward iTunes and to a degree of dominance that should make artists and labels at least a little nervous, I'm still curious about some of the stuff that falls in "other." I expect not all of it is covered here.

    @gwenhwyfaer: Well, look, I'm not a lawyer, so I try to say "monopoly-like" or "effective monopoly." For one thing, the legal definition shifts.

    But as for evidence of Apple engaging in anti-competitive practices:

    1. Price fixing — that's happened. Variable pricing makes it slightly better, but it took them long enough. They introduced the store in 2003 and added variable pricing only this year. They've locked down numerous exclusives for album distribution, and own enough of the market that they effectively set prices for everyone else — the Wal-Mart effect.

    2. Locking out competitors: Apple openly blocks other software from syncing with their iPod and iPhone, and as in the other story today, took legal action against sites even discussing how to circumvent those measures to sync music – a measure entirely separate from DRM on tracks and unrelated to piracy.

    Now, that's not to say that some of their competitors haven't bungled efforts to compete. But you could have made the same argument about Windows in the 90s (hello, OS/2).

  • Holotropik

    I probably buy 95% of my music from Beatport….then use iTunes to organize and sync my iPhone and arrange playlists in iTunes for Traktor.

    I buy 1% of my music from iTunes and the rest would be sets I find on Forums or Podcasts etc.

    I have not bought physical media format for ages now and never will again.

  • http://www.jorgebarrientos.com Jorge from Madrid

    ahem, ahem… I'm the only one here STILL buying vinyl? I can tell you for sure, not EVERYTHING is in BeatPort/Juno/You name it.

  • aikah

    simple , Beatport crushes the other shops … they dont have the coolest prices but they have the best catalog regarding electronic music , period. Why ? because as a producer 90% of my earnings come from Beatport .

  • http://www.friendlyvirus.org David Felix

    i don't think i ever bought music in digital format. i still buy music in physical form, mostly CDs, from small distributors and speciality shops or directly from the artists in merch tables after their gigs.

  • http://n/a Mattigus

    I attempt to purchase digital now. I avoid iTunes like the plague, so Amazon's the next best alternative. However, I felt like commenting to this thread just because I was inspired to directly purchase from an Artist: Your article on edIT was exciting and I was able to head directly to the HIS store outlet and buy his material (even at FLAC, might I add). I think if an artist can afford it, they ought to just host their own material, and also have it on sale for iTunes for widespread appeal.

    It feels exciting to purchase an album (not individual songs) from an artist and waiting for the download meter to finish. The digital equivalent of waiting in line?

  • Genjutsushi

    Ive been buying a lot more from the Amazon mp3 service. It is growing in popularity in the UK. Would be interesting to view the european data compared to the US data sets.

  • http://fallsastar.com Foosnark

    I buy in whichever format is cheapest and most available… but not from iTunes.

    I wonder where subscription services fit in, or hybrid things like eMusic which are subscriptions to a certain number of downloads per month.

  • J.

    i wish they would package vinyl with the cds

    screw all this digital shit! give me a physical copy with album art linear notes etc etc

    as someone who is 25 years old and whos bought more vinyl in the last 7 years then wtf do people see in paying for sub par quality copy protected mp3s(or m4a's whatever)

    exciting waiting for a downloand to finish really? wow

    not to mention this artists are getting screwed by itunes,beatport etc etc they're making pennies on a .99 cent sale if even that

    especially in the 'indie' industry go to shows buy a shirt the cd etc etc

    go to your local indie music shop and ORDER it

    sorry for not really bringing anything new to the table but this crap makes my head want to spin!

  • J.

    "whos bought more vinyl in the last 7 years then"

    then cds

  • J.

    "aikah

    simple , Beatport crushes the other shops … they dont have the coolest prices but they have the best catalog regarding electronic music , period. Why ? because as a producer 90% of my earnings come from Beatport ."

    really? how much are you making per track you sell for how much?

    if you dont mind me asking

    how many tracks did/do you have to sell before you start making money?

    are you on a label and if you are what % does your label get after beatport takes there cut?

  • Sean

    I guess I'm in the minority here. I buy my vinyl at my local record stores, and I purchase digital downloads from iTunes. I'm very happy to have the convenience of paying .99 to 1.29 to check out new music. I remember when a band had to sell their soul to a record company to get the kind of exposure Apple offers. I think it's laughable to suggest Apple is somehow the great enemy to artists and consumers that some here seem to think. Or, that it's a surprise that a company would try and protect their product's position and viability in the market.

  • http://ardour.org/ Paul Davis

    i've loved emusic.com for 4 years, watching it get to the point where almost any piece of music i heard on an internet radio stream was trivial to find and buy there. and i did – 65 downloads a month plus the occasional booster pack. i was paying an absurdly cheap price for the downloads. then they got the sony "old" back catalog, a new pricing structure, and new options none of which came close to the deal i used to have. i've put my account on hold for 3 months just as it was was about to switch to their new pricing, and i'd bet there is only a 50/50 chance that will use it again when the time is up. i think its clear that emusic's executives believe that their future relies on expanding their customer base to include those who want major label stuff. the pricing is still a great deal compared to iTunes, but the fact that they clearly don't believe they can survive without major labels has taken away a LOT of the attraction for me.

  • Dominic

    @Sean; companies protect their product viability and profit margins yes, that is never a surprise. Some do it with physical violence; some by using child slaves…

    I don't see this article as attacking Apple per se, merely pointing out that they are coming close to being a monopoly in the digital music industry.

    @gwenhwyfaer, a monopoly does not necessarily indicate foul play, it is often the result of simply being 'better' (think Google and yes, perhaps iPod + iTunes); I'm sure you know this but hey.

    http://en.wikipedia.org/wiki/Monopoly

    However, and I think that this what the article is driving at, monopolies *are* to be feared – they are intrinsically anti competitive which is detrimental to the consumer (of, if you're a dramatic socialist like myself, world progress!) – and when a given company, be it Microsoft, Google or the pretty white and grey company, comes even close to abusing their position, the situation needs bringing to attention.

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  • Esol Esek

    Apple has about a minute before all the music mafia send an antitrust action through Congress. No way this will stand. Apple is gonna get slapped.

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