KEY POINTS:
Digital music sales in New Zealand are soaring with mobile phone company Vodafone selling the most music singles, beating out traditional record stores, The Warehouse, iTunes and rival phone company Telecom for the top position.
Apple, which makes iPod media players, Macintosh computers, the iPhone and owns iTunes, said in an announcement on April 3 it had become the top-music seller in the United States, surpassing Wal-Mart stores for the first time.
It cited consumer data collected in January and February by American market research firm NPD as evidence.
In New Zealand, Vodafone said it sold 106,000 singles and had 160,000 total music sales, including ringtones, albums, videos and singles, in December.
The songs are dual-delivered, meaning they arrive on a customer's personal computer and cellphone simultaneously.
Vodafone sells more singles than anyone else, either physically or digitally, and was the biggest digital music retailer last year , according to its music manager Morgan Donoghue.
He believes physical singles, with the exception of one-off charity singles, are being phased out.
"They've always been a bit of a loss-leader for record companies to sell albums. Because of the cost of manufacturing and the royalties that you pay the artists, there's no real margin in them for the record companies. Whereas in a digital world where you don't have to manufacture it, you deliver it once and you don't run out of stock or have to courier it to a store there is a big difference, digital music sales actually make financial sense.
"My parents grew up with vinyl, I grew up with CDs and my kids will grow up with music on their mobile phones and on their iPods. That's just the evolution of it. And then music will become something that we consume like we consume power or broadband, it's going to become a service."
Mr Donoghue said companies offering digital music sales were trying to combat people "stealing" music from free websites such as LimeWire and BitTorrent.
"What we're all doing is looking for the model where it's (music) at the right price, where people don't need to steal it. Because, I think people feel slightly guilty about it (stealing), but unless there's something done to curb the stealing I think it's going to have a massive effect on the industry."
He predicts fewer artists will be signed and record companies will focus on "one-hit-wonders" rather than spending time and money developing current artists, if the free downloading of music is not stopped.
The way people buy music has also changed what they are buying.
Because they were now easier to buy, more singles were sold than before digital singles were introduced, Mr Donoghue said.
"You're not reliant on record shops stocking it, you don't have to catch a bus into town, or go park your car and pay for the parking to go into the music store to buy a $5 single which ends up costing you $10. You just look at it on your phone, search for it, you've got nearly a million songs there and download it and it's all done in a minute."
In five years CD sales would still be at current levels , but would fall off soon after that, Mr Donoghue said.
"If you look at the New Zealand album sales, particularly at Christmas time, we had Led Zeppelin best-of at number one, The Eagles at number two, I think Outrageous Fortune at number three or four, it was very catalogue.
"What you're finding is the young people are buying (digital) singles and they're very singles focused and the older people are buying albums on CD."
But, as the younger people get older they will start buying albums online and on their mobiles and the CD sales will start suffering, Mr Donoghue predicts.
In November, most of the Sounds music stores closed after Icon Digital Entertainment, which operated the music chain, went into voluntary administration owing creditors almost $20 million.
Icon blamed a soft retail market in New Zealand and illegal music downloading for its troubles.
Music store sales slumped from more than $50 a person in 2000 to $34 a head in 2006. Total music sales were $200 million in 2001 but that had dropped to $147m in 2006.
At the time of Sounds collapse, Auckland-based Real Groovy music store owner Chris Hart blamed competition from discount general retailer The Warehouse which sells CDs for $22 against most specialist music stores at around $35.
- NZPA
