The Impact of Declining CD Sales

It won’t come as surprise to most tech-savvy consumers that traditional music formats – specifically CDs – are in the middle of a massive decline, and have been for a few years now. Figures from the British Phonographic Institute, which represents the UK’s recorded music industry, showed that CD sales fell by 23% in 2018 – the biggest drop in sales for nearly 20 years! In real terms, that’s a decline of around 10 million CD sales in 12 months, from 41.6 million sales in 2017 to 32 million at the end of 2018.

This follows almost a decade of gradually declining sales for the format. Since 2008, there has been a year-on-year average loss of 9.6 million sales – totalling a total decline of nearly 100 million album sales since then. While this has affected the entire industry, it’s clear that those suffering most from a slowdown in album sales are individual artists and the record companies that represent them. For instance, of the 10 best-selling albums of 2018 in the UK, 6 were compilations or movie soundtracks, indicating that the appetite for physical albums, especially from major artists, is not there. Interestingly, however, of these 6 albums, the majority were bought physically, rather than through digital download or streaming. For example, approximately 90% of Now 101 albums, a compilation of UK hit singles, were bought in a physical form.

Obviously, the largest contributor to this decline in CD sales is the explosion of music streaming services, such as Spotify, Apple Music, Deezer, and others. These (primarily) paid subscription services offer the ability to play and download millions of songs, artists and albums from a range of smart devices, as long as the device has access to the internet. In 2018 alone, over 91 billion songs were streamed worldwide, demonstrating how popular these platforms are and how dominant they have become in the industry. This has contributed to a huge growth in the overall UK music industry, which saw an annual rise of £109 million in 2018.

So, while streaming services are claiming a near-monopoly on the way we consume music, showing no signs of slowing down, all of this is bad news of those that still enjoy physical albums and the retailers that rely on their sales.

In recent years, major supermarkets in the UK have been scaling back the amount of shelf space they give to CDs and other physical music formats. This is in line with falling profit shares across the sector – supermarkets accounted for 31.6% of all physical sales of CDs in 2015, falling to 27.4% the following year. And this number has continued to decline steadily. On top of this, each individual supermarket has seen its share of physical music sales dropping consistently, indicating that the shift to streaming is the main competition, and not direct retail competitors.

Despite the impact falling sales have had on big supermarket chains, no retailer has felt the sting quite like HMV and other high street music sellers – entire brands that were built on the sale of physical music media. At the beginning of 2019, the HMV chain went into administration for the second time – having first encountered trouble in 2013. This was primarily due to falling profits and a lack of sustainability in the market. Despite being responsible for over 31% of all physical music sales in the UK in 2018 (according to their own figures) the industry as a whole has seen a decline of 17% across 2018 and 2019. The lack of competition against online streaming services, coupled with other internal factors, has put HMV in a precarious position – one which could see a household name in the sector disappear completely.

However, the troubles facing HMV are not specific to them or the retail industry at large, with many traditional retailers facing increased competition online which is leading to an intense squeeze of the market. By far the biggest online competitor, Amazon, has started to dominate physical sales, with consumers preferring the price point and convenience of delivery. Furthermore, Amazon operates its own streaming service, which further puts pressure on traditional retailers, where they simply can’t compete.

Overall, this paints a very bleak picture of retailers, CD as a format, and those out there that still prefer physical media. As we move further toward subscription models and streaming services, it’s becoming more and more likely that we’ll no longer ‘own’ our purchases in the traditional sense. After all, if you pay £9.99 a month to listen to an album on Spotify, there’s no guarantee that the platform or the artist won’t simply remove it – offering you very little in the way of recourse. We have seen this sort of activity recently, with Taylor Swift’s infamous removal of her work from Spotify. While this issue has since been resolved, it’s a clear indicator that paying members of the public have little control over what they can consume when they don’t have a physical copy. That said, you can argue that the benefits of (overall) cheaper and more accessible music is a net positive for all music fans: it’s simply a matter of preference.

While it may seem like the long, slow death of physical media, there are some forms that are bucking the trend slightly. The most obvious example is the growth in sales of vinyl in recent years. The medium saw a 12% increase in sales in the US in 2018, and while this doesn’t match the overall growth for the music industry – thanks to streaming services – it’s not too bad for a physical format that hasn’t been popular for decades. The growth of vinyl can most likely be attributed to a modern desire for physical media, and a lot can be said for the aesthetic of the vinyl; the album art, the feel, the physical player itself. And in a world were non-physical media is looking like the way forward, it’s important to recognise that some consumers are resistant to this change and want to continue to help ‘dead’ genres survive. Perhaps with the near-inevitable decline of CDs, we’ll see a revival in the years to come.

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