April 6, 2007

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To date, sales of digital tracks are up 41% for the year. That's a positive sign, but the numbers hint that a slowdown will occur in the coming years. Why? A slowdown already exists in the regions of the country that first got into digital music.

See the graph above, which shows the percent increase in digital track purchases for 2007. Red states have a digital track sales growth of 30% of less. Green states have growth of 31% to 40%. (I have grouped the states according to the regions Soundscan uses in its reporting.)

Digital sales are slowing among the earliest adopters. In the Pacific region, track sales are up only 30% for the year. In the South Central region of the country, on the other hand, the increase is 49%. In the Central region, the increase is 55%.

There's more: Digital track sales are up only 28% in city regions versus 55% in rural areas.

The early adopters, the technologically adept consumers who congregate in West Coast cities, are slowing in their digital purchases. The rest of the country has been catching up. The slower pace at which West Coast city dwellers are purchasing foreshadows a slowdown in other regions. They've already passed the iTunes binging phase that people in rural areas and the middle of the country are currently experiencing.

The geographic differences are nothing new. At this point last year, the Pacific region was up 87% (compared to 30% in 2007). Southern states were up 100% or more. City consumers were up 67% (compared to 28% in 2007). Rural areas were up 104% (compared to 55% in 2007).

What are the implications for the music industry? To maintain digital sales growth, labels need to engage early adopter consumers on both coasts. Innovations will first take hold there, then move to the middle of the country. EMI's decision to sell downloads without DRM is a good first step to engaging the coasts, and it could foster the kind of entrepreneurial spirit that will lead to new products and services.

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Posted by Glenn at 12:47 PM | | | Digital Music