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Last year, for the first time, iTunes music downloads fell. Various sources peg the decline at around 14 per cent, a serious drop in sales.

So what’s causing it? There’s one big answer: Spotify and other streaming services. Spotify has been gunning for iTunes music crown Spotify Your Music Collection: The End Of iTunes Spotify Your Music Collection: The End Of iTunes Spotify is no longer content to just compete with radio, now they're competing with the idea of even owning music. Read More , and this is one sign it might be winning.

Spotify Ascendant

Late last year Taylor Swift dismissed Spotify as an “experiment” that doesn’t “fairly compensate” artists. I offered a point-by-point rebuttal Why Taylor Swift Is Wrong About Spotify Why Taylor Swift Is Wrong About Spotify In the past week Taylor Swift has pulled her music from Spotify, inspired countless song-pun laden headlines and reignited the debate about streaming music services. Read More to her claims, pointing out that Spotify was showing all the signs of being the future of music – but I was wrong. Spotify isn’t the future of music, it’s a huge part of the music industry right now. 

Not only are iTunes’ sales falling, but the number of Spotify users is soaring. Since 2011, Spotify has grown from around 10 million users to more than 50 million last October to 60 million today. It’s not that people are listening to less music – they’re just listening to it in different ways.

spotify-growth

People are also spending money on Spotify. The streaming service has 15 million paid subscribers — a 2.5 million increase in the last three months — each spending about $10 per month on the service. Spotify also makes money from the ads heard by users who aren’t paying.

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Spotify pays out almost 70% of their revenue in royalties to rights holders. They’ve paid out more than $2 billion in total, and that number is only going up. It’s reached the point that, in Europe last year, Spotify paid out 13% more than iTunes in royalties to artists.

The Writing’s On The Wall

Apple has seen the writing on the wall for a while. Their acquisition of Beats Apple Buys Beats, Firefox Phones Home, Amazon Sunday Deliveries [Tech News Digest] Apple Buys Beats, Firefox Phones Home, Amazon Sunday Deliveries [Tech News Digest] Apple is probably buying Beats, the latest ZTE Firefox OS phone lands in the U.S., Amazon's Sunday deliveries, Cinamatic for iOS, Google Classroom, and the World Under Water Google Street View mod. Read More was suspected to be, in part, about Beats’ streaming deals. Prior to that, Apple had introduced iTunes Radio in iOS 7 Apple Announces iOS 7: New Design, Multitasking & Many New Features Are Coming Your Way [Updates] Apple Announces iOS 7: New Design, Multitasking & Many New Features Are Coming Your Way [Updates] Apple has just revealed iOS 7, calling it "the most significant iOS update since the original iPhone". iOS 7 brings a new interface, icons, color palette and typography to the old mobile OS, as well... Read More to try and shut down Spotify’s growth.

Neither of these became a success for Apple, but they do show that Apple realizes the future is in streaming music.

Is This The End Of Music Downloads?

Millennials – that is, my generation – are eschewing digital ownership The End of Ownership: Netflix, Spotify, and The Streaming Generation The End of Ownership: Netflix, Spotify, and The Streaming Generation Read More in general. We either subscribe to streaming services or we pirate things. However, we’re largely unique in this.

My personal feeling is that paid downloads are slowly dropping over the edge of a long precipice. I’d be very surprised if iTunes sales grow again. I don’t think iTunes sales are going to drop to zero overnight, but I think that over the next ten years they will continue to fall. At what percentage they bottom out remains to be seen.

A 14% drop is significant mostly because it runs counter to years of rapid growth. It’s unlikely that iTunes downloads will continue to fall at such a fast rate. Even if they fall at 5–10% a year, iTunes still has far more than a decade of being a major player in the music industry. But the fact that iTunes’ growth is down, while Spotify’s is up, says a lot.

Arrested Descent

Music streaming services like Spotify still attract a lot of ire. Not everyone is as open to the idea that if you stop paying, you lose access to all your music. It requires an attitude to ownership that most who grew up in the times of tapes and CDs don’t have.

Musicians and record companies will continue to push for digital downloads. While the potential revenue is lower in the long term, it is far more lucrative up front. This is especially important for record companies looking to recoup their investment. As the Taylor Swift situation showed, if you want to have a big launch, it pays to make sure as many people as possible buy your album in full, up front. Launching an album with a long-tail streaming strategy aimed at generating revenue over five years just doesn’t make for big headlines or happy executives.

taylor swift

There are also other interest groups who will try to prolong music downloads. The Billboard Hot 100 — which uses data gathered by Nielsen — is based on sales which are now largely digital. Spotify publishes top lists for every country it operates in and for the service as a whole. Their access to data goes far beyond Nielsen’s. If digital downloads cease to be relevant, Nielsen’s business will become pointless.

So What Now?

Despite the articles proclaiming the end of iTunes — including one written by me last year Spotify Your Music Collection: The End Of iTunes Spotify Your Music Collection: The End Of iTunes Spotify is no longer content to just compete with radio, now they're competing with the idea of even owning music. Read More — music downloads aren’t going anywhere fast.

We’ve just reached peak download. Over the next few years music downloads will continue to fall as streaming continues to rise. At some point, streaming will become significantly more popular world wide and music downloads will begin to become a niche thing for luddites and collectors. But that day is still a while a way.

  1. Leah
    January 21, 2015 at 2:19 am

    There will never be an end to purchasing songs, but with such programs like Spotify it just means less will be bought. Favorite songs are always going to be bought. Maybe not everyone will buy them, but a good majority of the fans will be there.

  2. Jackson
    January 20, 2015 at 9:26 am

    Since when did iTunes Radio not take off? I use it all the time, it's awesome! I may not be one of those people who want to listen the the same songs over and over again, so discovering new songs through iTunes Radio is one the things I love the most about it. The more I discover, the more likely I am to purchase the entire album.

    • Harry
      January 20, 2015 at 10:02 am

      I think you're in the minority Jackson! For something that got a big launch at an Apple event it's made surprisingly little dent. It certainly hasn't stopped Spotify in it's tracks.

  3. Deen
    January 20, 2015 at 5:31 am

    What goes around comes around.

  4. Sean
    January 20, 2015 at 2:13 am

    I'd be willing to purchase more downloadable music content from Amazon, Apple etc. if the bit rate/ sound was CD quality or higher. It is not. I rest my case.

    . . . and adding to, Ather's point, if I'm paying that much per song, it better be lossless.

    • Harry
      January 20, 2015 at 10:01 am

      You can get Apple lossless from iTunes for a little more I think? Spotify does pretty good high-bitrate stuff as well, once you're on premium.

  5. Tim
    January 20, 2015 at 1:50 am

    If digital downloads are dying, so is independent music, there's simply not enough revenue generated from Spotify for small artists/labels http://blogs.itmedia.co.jp/yasusasaki/images/2010/04/22/4517668895_a1247d597d_o_2.jpg

    • Harry
      January 20, 2015 at 3:54 pm

      The figures in that are well off. It's also five years old! Spotify pays a minimum of 0.005$ per play and it's up to 0.008$. So it's between 150k and 230k plays for $1000. High numbers yes, but a far cry from 4 and a half million.

  6. Ather
    January 20, 2015 at 1:02 am

    Perhaps the problem is the iTunes' artists jump from 99 cents a song to 1.29 That's not appealing like 99cents a song was.

    • Harry
      January 20, 2015 at 10:00 am

      Yeah that's definitely going to be turning people away. Though where it's turning them is probably Spotify!

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