The State of Internet Music on YouTube, Pandora, iTunes, and FacebookS

"The music business historically has been built around albums. This album-centrism is like saying the sun revolves around the Earth. We don't listen to albums now; we listen to collections of songs."

"More people are engaged with music than ever before," said Tom Silverman, chairman and CEO of Tommy Boy Records. "It's a hockey stick going up; it's an incredible opportunity that so far has eluded us." Silverman was speaking this morning at the New Music Seminar in New York City, where he and Eric Garland, CEO of Big Champagne (who also unveiled the Ultimate Chart today), gave a State of the Music Industry address. Even if you aren't a player in the industry and only an avid music listener, the figures that Silverman and Garland culled will surely surprise you. Here are a few of their key findings.

A shift from albums to singles

Of the some 100,000 albums released last year, 17,000 of them sold only 1 copy; more than 81,000 albums sold under 100 copies. In fact, just 1,300 albums sold over 10,000 copies, an astonishing figure given that these numbers combine physical and digital album sales. And for physical sales alone? Only 2% of new albums on Soundscan sold over 5,000 copies—that's a skydiver's plummet from the golden era of the music industry.

The State of Internet Music on YouTube, Pandora, iTunes, and FacebookS

"The music business historically has been built around albums," explained Silverman. "This album-centrism is like saying the sun revolves around the Earth. We don't listen to albums now; we listen to collections of songs."

Of course, the reason for significant single-growth and slowed-album sales is due in part to iTunes hawking every song as a single for 99 cents. "Historically, the price of an album was five times greater than a single," said Silverman, who believes setting the price at a tenth of an album's cost was a mistake and that even $1.29 is too low. "It should've been a $1.99, and then we would've seen higher digital album sales because it would've been a bigger discount for buying an album." But both Silverman and Garland agreed that this is changing, citing the fact that about 14% of all of Universal Music's digital sales are for complete albums, which suggests that the $9.99 price-tag is becoming approachable for consumers.

Facebook, Myspace, and Twitter: Track your FFF number

According to Garland, industry folks today are obsessed with "FFF numbers"—that is, an artist's friends, fans, and followers. "It's a race, but to what end?" he wondered. Garland showed through a series of charts how Twitter and especially Facebook are ballooning in popularity for artists like Lady Gaga, while once popular Myspace's numbers are stymied.

However, Garland points out that Facebook recently forced most users into converting their profile favorites into "fan" data, which arbitrarily inflated the social network's numbers. For example, Garland tells the story of how when Susan Boyle's performance first blew up, a friend of his added the YouTube star to his Facebook profile. When Facebook imported this data though, he instantly became a "fan" of Susan Boyle. "[He] had no interest in it—[he] liked her for like 30 seconds, once!" Garland relates. "It doesn't really indicate any consumer activity—it's automated," added Silverman.

Garland's story serves as an indicator of just how difficult it is to figure out the influence of an artist through his or her FFF number. After all, even if Lady Gaga starts losing friends on Myspace, that's less of an indication of her popularity, and more a sign of Myspace's falling use.

Google and YouTube more important than iTunes?

Interestingly, it wasn't Apple that Garland viewed as the most important name in music, even though the company's iPods, iPhones, and iTunes indicate otherwise. "YouTube is increasingly the category killer," argued Garland. "When people ask me what is the biggest name in music in my opinion, they want me to say Apple. I usually answer: YouTube."

Garland told audiences that if you actually look to where people are listening to music—not even just looking at videos—consumers are turning more and more to YouTube, which he calls the "largest catalog of on-demand music on the Internet." If only Google could make this service profitable, right?

Internet radio: Pandora

Garland and Silverman pointed out that Pandora is now the most popular Internet radio service, with a 52% market share, close to 60 million registered users, and more than 1 billion stations.

And in a sign of just how much the Web has impacted music, Silverman told the crowd that Pandora now represents 1.7% of all radio listening—really a shocking figure to think about. Obviously, traditional music media is going away. But is the music industry ready for the change?

The State of Internet Music on YouTube, Pandora, iTunes, and Facebook

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