Here's why 2012 music sales don't tell full story

The sales numbers that matter most were down but the data being reported doesn't include revenue from subscription or satellite and Web radio, areas that are seeing big growth.

Nielsen Soundscan says that 2012 overall music purchases were up 3.1 percent and that's the news that most media outlets have focused on.

CDs and physical albums continue to be the dominate format but for how long? Photographed is the listening post area in Som Records in Washington, D.C. Greg Sandoval/CNET

What they missed, however, is that overall sales of albums and track equivalents (albums typically have 10 songs) were down 1.8 percent. That's the figure that's much more reflective of whether the sector generated more money.

The truth is that neither number tells the complete story about the health of the industry. What Nielsen Soundscan's figures don't reflect is the money generated by Webcasters, satellite radio, and subscription services, such as Pandora, SiriusXM, and Spotify.

To see the revenue those sectors are producing, we're going to have to wait until the Recording Industry Association of America releases its end-of-year music shipment statistics. Those typically come out in the spring. All indicators so far are that they're growing.

Still, if you absolutely need a barometer now for the health of the music sector, Nielsen's figures aren't bad.

Believe it or not, physical albums are still the dominant format -- although they continue to decline (12.8 percent last year), according to Nielsen.

Digital album sales increased 14 percent and digital tracks rose 5 percent. It's the same old story: Overall, digital isn't growing as fast as analog is shrinking.

More than a decade after the file-sharing era began, sales have been halved from what they were in 2000. Now, even downloads of individual tracks, which Apple helped usher in, appear to be waning as more music consumers gravitate to streaming services.

What hasn't been proven yet is whether subscription services and Web radio can operate profitably.

When it comes to reporting figures, the music sector is likely going to need to create a way to report streaming and Webcasting money in a cohesive way with traditional sales.

 

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