Let’s face it, in a post-Napster era of online music consumption, illegal downloading is still rampant. These conditions have left record companies scrambling to fill the revenue void left by piracy. And for industry analysts, it is particularly difficult to assess listener trends with so many people procuring their music illegally.
Combined physical and digital album sales are reflective of this trend. They have declined steadily every year since 2006, when 588.2 million units were moved, according to Nielsen SoundScan. Only 326.2 million albums were sold in 2010.
So are people still listening to as much music as they were in 2006 — legal or not? In order to analyze this, illegal download figures must be estimated. After all, Nielsen SoundScan doesn’t publish piracy statistics.
A market research firm called NPD Group published a study in 2009 stating that people only paid for 37 percent of music acquired. Using this number, a “total albums acquired by any means” figure can be estimated. From this, a set of historical “illegal album downloads” can also be approximated.
A plot of comparing total album sales with total albums acquired shows the glaring discrepancy between legally and illegally obtained music. The white space between the two lines, picture in slide three, essentially represents illegal downloads.
Further, these numbers also show that people are choosing to own fewer albums. One possible explanation is the increased popularity of online streaming services such as Pandora and adoption of online radio.
In short, record companies should start looking to generate additional revenue streams through tours and merchandise, because album sales are looking increasingly bleak.