Why Are Consumers Downloading Less Music?

Source: Apple.com

It was reported late last week that digital music downloads fell during 2013, the first time a decline was recorded since Apple (NASDAQ:AAPL) launched its iTunes Store 10 years ago. Now, analysts are trying to explain why consumers are downloading less music for the first time in a decade.

Data from Nielsen SoundScan showed that in 2013, digital track sales decreased 5.7 percent, from 1.34 billion units to 1.26 billion units. Meanwhile, digital album sales dropped 0.1 percent, from 117.7 million units to 117.6 million units.

Many industry executives believe that the digital music sales decline may be due to the growing popularity of subscription and ad-supported music streaming services. Internet streaming services like Pandora (NYSE:P), Spotify, and others saw a surge in popularity in 2013. Consumers get more access to a wider variety of music for free if they’re willing to listen to ads. Even a premium subscription to Spotify or Pandora costs much less than purchasing the albums and songs you get access to via the services.

Asymco analyst Horace Dediu has a different explanation for the shift away from music downloads. He also points to apps as the reason for less music being purchased and downloaded, but he thinks that all apps, not just streaming music services, are contributing to the decline. He said apps are taking up more and more of consumers’ down time and replacing other activities like music listening.

“Consumers have a fixed time budget, a more rigid constraint than their spending budget. Competition for a slice of a consumer’s time budget is far tougher than competition for a slice of a consumer’s wallet,” Dediu wrote.

Apps, he says, are initially appealing for their inconsequential nature — their ability to take up tiny chunks of time spent waiting in line or riding the subway. But as they become more appealing and “addictive,” apps begin to replace other forms of time-filling, like listening to music or watching TV.

9to5 Mac reporter Ben Lovejoy says that Dediu’s theory isn’t a satisfactory one for music in particular because people frequently listen to music while engaging with other apps. However, Dediu’s argument does work well in terms of other types of media. Apps are doing an increasingly good job of capturing people’s attention, and media forms like TV, movies, and online activities shouldn’t blow off apps as they compete for consumer time budgets.

Could the drop in downloads be a combination of the rising popularity of music streaming and consumers’ time being taken up by other distractions? Maybe. It’s also worth pointing out that downloaded music takes up tons of space on mobile devices, so it may be easier to listen to Spotify while on the go, rather than trying to put an entire iTunes library onto a phone.

This shift isn’t a problem for everyone. For companies that have invested in both markets, the growth of music streaming may counter the recent declines seen in digital track sales. Fortunately, Apple is one of those companies, having launched its iTunes Radio service in September. Between iTunes Radio and its lucrative App Store, Apple really doesn’t need to worry about the drop in music downloads.

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