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The State of Internet Music on YouTube, Pandora, iTunes, and Facebook

"More people are engaged with music than ever before," said Tom Silverman, founder of Tommy Boy Records and the New Music Seminar. "It's a hockey stick going up; it's an incredible opportunity that so far has eluded us." Silverman was speaking this morning at the New Music Seminar in New York City, where he and Eric Garland, CEO of Big Champagne (who also unveiled the Ultimate Chart today), gave a State of the Music Industry address. Even if you aren't a player in the industry and only an avid music listener, the figures that Silverman and Garland culled will surely surprise you. Here are a few of their key findings.

A shift from albums to singles

Of the some 100,000 albums released last year, 17,000 of them sold only 1 copy; more than 81,000 albums sold under 100 copies. In fact, just 1,300 albums sold over 10,000 copies, an astonishing figure given that these numbers combine physical and digital album sales. And for physical sales alone? According to Garland, only 2% of new albums on Soundscan sold over 5,000 copies—that's a skydiver's plummet from the golden era of the music industry. This chart shows you how much the industry has changed:

"The music business historically has been built around albums," explained Silverman. "This album-centrism is like saying the sun revolves around the Earth. We don't listen to albums now; we listen to collections of songs."

Of course, the reason for significant single-growth and slowed-album sales is due in part to iTunes hawking every song as a single for 99 cents. "Historically, the price of an album was five times greater than a single," said Silverman, who believes setting the price at a tenth of an album's cost was a mistake and that even $1.29 is too low. "It should've been a $1.99, and then we would've seen higher digital album sales because it would've been a bigger discount for buying an album." But both Silverman and Garland agreed that this is changing, citing the fact that about 14% of all of Universal Music's digital sales are for iTunes "Complete My Albums," a program where you receive credit for having already purchased the single, but have the option to upgrade and purchase the full album. This suggests the $9.99 price-tag is becoming approachable for consumers.

Facebook, Myspace, and Twitter: Track your FFF number

According to Garland, industry folks today are obsessed with "FFF numbers"—that is, an artist's friends, fans, and followers. "It's a race, but to what end?" he wondered. Garland showed through a series of charts how Twitter and especially Facebook are ballooning in popularity for artists like Lady Gaga, while once popular Myspace's numbers are stymied.

However, Garland points out that Facebook recently forced most users into converting their profile favorites into "fan" data, which arbitrarily inflated the social network's numbers. For example, Garland tells the story of how when Susan Boyle's performance first blew up, a friend of his added the YouTube star to his Facebook profile. When Facebook imported this data though, he instantly became a "fan" of Susan Boyle. "[He] had no interest in it—[he] liked her for like 30 seconds, once!" Garland relates. "It doesn't really indicate any consumer activity—it's automated," added Silverman.

Garland's story serves as an indicator of just how difficult it is to figure out the influence of an artist through his or her FFF number. After all, even if Lady Gaga starts losing friends on Myspace, that's less of an indication of her popularity, and more a sign of Myspace's falling use.

Google and YouTube more important than iTunes?

Interestingly, it wasn't Apple that Garland viewed as the most important name in music, even though the company's iPods, iPhones, and iTunes indicate otherwise. "YouTube is increasingly the category killer," argued Garland. "When people ask me what is the biggest name in music in my opinion, they want me to say Apple. I usually answer: YouTube."

Garland told audiences that if you actually look to where people are listening to music—not even just looking at videos—consumers are turning more and more to YouTube, which he calls the "largest catalog of on-demand music on the Internet." If only Google could make this service profitable, right?

Internet radio: Pandora

Garland and Silverman pointed out that Pandora is now the most popular Internet radio service, with a 52% market share, close to 60 million registered users, and more than 1 billion stations.

And in a sign of just how much the Web has impacted music, Silverman told the crowd that Pandora now represents 1.7% of all radio listening—really a shocking figure to think about. Obviously, traditional music media is going away. But is the music industry ready for the change?

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  • Rio VonWulf

    Albums usually have the "hit" and then 10-13 other songs. No wonder the public wants to buy only what they want to hear and compile their own collection. I have stopped buying Cd's. One because of the stupidly of the industry and the bullying of defenseless people.
    Had the music industry bought out Napster they could have put themselves in the catbird seat and downloading from very high quality sites is cheaper for them and has a greater profit margin.
    singles is where it is going as the public has had enough of the poor album song selection.

  • Mia

    Let's not forget that 7 in every 10 music searches online according to Bing's latest article are lyrics related.

    Your article does not take into account the mass amount of people searching for music lyrics considering they no longer have access to the cd booklets that they used to receive with hard copy purchases.

    Close to 70 million unique users a month are on Lyrics websites.

  • Ryan Kirk

    These numbers obviously don't take into account the number of bands that are releasing and selling their music on their own. More bands are skipping the record labels and selling their music independently. I know this because I work in the industry. We have many bands who are selling more than 2500 CD's per year at shows and on their own websites. This is in addition to selling on download services which would further increase the number. New music is not dead. Folks are just turning to alternative sources to discover non-mainstream music.

  • Michael Senchuk

    I've been thinking about some of this as well. I think within a very short time you'll see bands, especially newer ones, not even bother recording full-length albums until they're well-established. In the meantime, they'll go into the studio, record and then release 2-3 songs, build some buzz, then another 2-3, etc., etc., until they have enough to go out on tour.

  • scott griffis

    Interesting thanks. I got into internet radio back in the 90's and the finally into yahoo music, but since then there have been so many other companies. It is tough to keep migrating profiles.


  • Andrew Whitacre

    "'The music business historically has been built around albums,' explained Silverman."

    Well, that's not exactly true. For decades the music business was built around singles, 45's and the like. And albums themselves were marketed--sold--on the backs of successful single songs. In other words, singles were always used to sell something else, and that hasn't changed. Today, single songs are used to sell concert tickets, subscriptions, any number of other company's products via TV ads.

    All today's consumers have done is finally managed to trim the fat from the song they actually wanted.