The impact of streaming on download sales and why there is no simple answer to the question of cannibalization

sub vs dldIn the past few months the publication of detailed national digital-music sales figures has illustrated great differences between countries’ digital-music-buying habits. Published analysis of digital-music sales patterns has drawn a variety of conclusions regarding whether subscription streaming services are cannibalizing download sales. However, as subscribing to music starts to become mainstream and download sales begin leveling off, or falling, more and more people are asking whether streaming is to blame.

Over the last week or so Music & Copyright asked visitors to this blog to vote on the issue. The overwhelming number of voters agreed that a rise in subscriber numbers would lead to a fall in download sales.

Blog poll

However, several voters pointed to the recent success of the Daft Punk album Random Access Memories and the single Get Lucky as evidence that streaming does not affect download sales. Both the album and single have been streamed extensively since release but sales have been high. For example, the album sold 339,000 copies in the first week of release in the US, according to Nielsen SoundScan. Only one other album, Justin Timberlake’s The 20/20 Experience, has sold more copies in its debut release week in 2013. Second week sales of the album were not so good though and fell 73%, to 93,000.

Other voters noted that the rate of downloads’ growth began flattening long before subscriptions gained any traction among consumers and that it was therefore too simplistic to make a causal link between the two music-access models. Some voters also said that the issue of access to unauthorized downloads was still the biggest problem for the recorded-music industry.

A common-sense conclusion?
Much of the debate surrounding digital-music cannibalization echoes similar arguments made about whether downloading music through unauthorized P2P services cannibalizes legal sales. Significant levels of research have concluded that the use of P2P services does affect legal downloading, but research also exists showing both no link and a positive effect on legal sales. A common-sense conclusion from all the research is that there is no “one size fits all” conclusion. Some Internet users will only download from unauthorized services, others are happy to pay, and some will do both.

The same argument can be applied to subscriptions and downloads. Some consumers will value the ownership of music, and therefore downloading suits their needs. Others will see the benefits of subscriptions and the wealth of music available for a fixed fee.

Few would deny that subscribing to a music-streaming service and a-la-carte downloading are two very different ways of accessing music. Buying a download, albeit with the involvement of a little more hardware and technical know-how, is a natural extension of buying a CD. Subscribing to a streaming service is much more of a commitment. Such a difference would suggest that streaming services will be favored by the more serious music user than a casual listener. If a consumer is confident that he is spending more than US$10/€10 a month on music, he is much more likely to subscribe to a music service than casual music consumers who spend below the monthly amount.

In most countries, subscription services account for a minority share of digital-music trade revenues, and therefore the important issue for the recorded-music industry at the moment is not cannibalization but how to turn significant numbers of new digital buyers on to legal services. However, although ownership and access digital-music services might not be targeting the same customers at the moment, there is a strong possibility that some of today’s downloaders will become tomorrow’s subscribers. Should that be a major concern? Not if the overall trade-revenue gains made in countries such as Sweden are replicated elsewhere. The only cause for concern is if the size of the digital-music pie does not increase in line with shrinking physical sales. If that happens, cannibalization will be the least of the recorded-music industry’s concerns.

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