Consumers don't download as much music as they once did.
Quoting an NPD Group analyst speaking at an industry event in New York earlier this week, CNET reports that there were 1 million fewer music download buyers during 2009 than the year before. Has Apple's (Nasdaq: AAPL) iTunes peaked as a music store?
In its current form, possibly. Pandora Music's free streaming service doubled to more than 40 million users and $50 million in net revenue last year, CNN reported recently. Free is tough to compete with.
Just ask Sirius XM Radio (Nasdaq: SIRI). Satellite radio's kingpin lost subscribers during 2009. So did Rhapsody. Consequently, RealNetworks (Nasdaq: RNWK) and Viacom's (NYSE: VIA) MTV have agreed to spin off the struggling streaming service as a separate company.
Yet these are the lucky ones. Music companies Warner Music (NYSE: WMG), Universal Music, EMI, and Sony's studio group are left to figure out how to earn more when fewer are willing to pay to find and download tracks.
Apple, for its part, appears to have known this day was coming. In December, the Mac maker spent an undisclosed sum to acquire Lala.com, a Web-based service that allows users to search for and stream music from within a Google search page.
Lala's most attractive feature is price flexibility. After an initial listen, users can either pay a small fee to stream selected tracks on demand directly from the Web, or download directly to their computers.
NPD senior analyst Russ Crupnick has a different idea. He told executives in attendance at the Digital Music East conference that consumers want labels to tell them what to buy. Accordingly, he'd hire experienced marketing executives from Kraft (NYSE: KFT) or Colgate-Palmolive (NYSE: CL), CNET reports.
Perhaps he's onto something. I'm more inclined to believe Apple has it right. In flocking to Pandora and Lala, music lovers have pledged allegiance to services that allow them to fully discover and buy tracks on their own.
Consumers aren't rudderless, and they haven't tired of iTunes and digital music. They just want a better delivery mechanism. Here's hoping the industry hasn't gone tone-deaf.
Should labels kick up their promotions machines? Discuss using the comment boxes below.
