The Single Goodbye

Ten years ago, when I was working on my PhD, I would regularly bump into Travis Elborough in the British Library. Little did I realise that we were exploring similar themes. I was writing my thesis about vinyl, which in adapted form became my book. Travis was also investigating recording formats. He believed that iTunes was destroying the album as a source of income and a ‘thing’. The fruits of his labour became The Long-Player Goodbye, which was published by Scepter in 2008.

            His predictions have not necessarily come true. 159m albums were sold in 2005. This figure was for physical formats only, as the download album was not yet generating any income. The British Phonographic Industry (BPI) published the sales figures for 2015 yesterday. They claim that there were 122m album sales last year. While this represents only three-quarters of the sales of a decade ago, it is probably more than anyone expected. Travis, for example, had suggested that the album appeared to be ‘severely imperilled’. But rather than being at risk, the album has revived. The sales figures for 2015 were up 3.7% on the previous year.

            Or at least that is how the record industry has chosen to present things. When we look more closely at the figures we find that genuine ‘albums’ - a collection of songs that a user purchases or consumes as a combined body of work - are not doing so well. CD sales are surprisingly resilient, but they are definitely not increasing: at 55.8m they were down 3.9% on the previous year. Digital albums are faring worse. Standing at 25.7m, they were down 13.5%. Back in 2008, Travis had glimpsed stirrings of a vinyl renaissance, describing it as a ‘peculiar rearguard action’ in the face of the defeat of the album. It is now more than that. In their report on the 2015 sales figures, the BPI note that vinyl was facing ‘near extinction’ in 2007, but its ‘fairy tale revival’ has seen sales reach a 21-year high. 2.1m units were sold last year, an increase of 66% on 2014. This does, however, still represent less than 2% of music consumption in the UK. In total, these formats accumulated 81.5m sales. This was five million fewer than the previous year, and just over half the albums figure for 2007.

            How, then, has the BPI reached its total of 122m album sales? First, they have quantified all individually downloaded tracks as ‘album equivalent sales’. Each download is only allowed to represent a tenth of a purchase, however, in deference the average number of tracks an album. In addition, each individual stream is counted as an album sale. These are divided by a thousand, in accordance with a ‘standard music industry metric’: ‘100 streams = one track sale and 10 track sales = one album’. Using these calculations, individual downloads were equivalent to the sale of 13.3m albums in 2015. Although this was down 14.7% on the previous year, any shortfall was more than made up by the popularity of streams. These were equivalent to the sale of 26.8m albums, a huge 81.7% increase on 2014.

            These mathematical shenanigans are not to everyone’s taste. Tim Ingham, founder of Music Business Worldwide, has described them as ‘self-evident madness’. I don’t think that Travis would approve of them either, albeit that they do provide evidence that some of his hunches were right. These ‘equivalents’ have helped to crack open ‘any notion of the album as linear, unalterable whole’.

            The larger question, however, is why should the record industry want to present every use of music as an album sale. Economics surely come into it. These figures help to downplay the popularity of streaming. This is useful in a climate when the low royalty income from streams is widely criticised. There were 26.8bn individual audio streams in the UK last year, as opposed to 81.5m physical and digital album sales, and yet despite this vast traffic streams are only generating around a third as much money (£251m as opposed to £687m, according to the BPI’s figures, which due to the low income from ad-supported services only feature the income from streaming subscriptions). The division by 1,000 makes this income appear just, as streams represent a third of physical and digital album sales when employing the ‘equivalent’ calculation. However, the BPI’s streaming figures are not only divided by a thousand, they are also halved. They fail to include the 26.9bn streams of music that took place through video sites. This includes YouTube, the most popular provider of music in the UK.

            If these figures tone down the popularity streaming, they also boost the importance of physical formats. When the equivalents are in place, the CD emerges as the leading product. In addition, vinyl’s percentage increases enable this format to be widely praised. It remains important for the record companies to promote these products, as this is where their main profits lie. The companies may well be deriving more income from streaming services than their artists do, but those royalties are dwarfed by the money they rake in with the sale of vinyl and CDs. Tim Ingham has calculated that Adele’s 25 would need to have been streamed 16.4 billion times to equal the $115bn it has thus far generated via physical formats and download sales.

In some cases, however, it costs the industry money to describe products as albums rather than as singles. Simon Fuller’s company 19 Recordings has taken their parent label Sony Music Entertainment to court, alleging a number of contractual misdemeanours. Among them is the fact that Sony regard individually downloaded tracks as singles, whereas 19 Recordings believes they should be classified as ‘segments’ of albums. These definitions have financial consequences, derived from the days when all records were physical, as the plaintiff’s case makes clear:

Because of the high costs of promoting the ‘single’ to radio as well as the relatively high costs of manufacturing, and distributing and marketing it to the ‘brick and mortar’ retail stores that then existed in comparison to those comparable costs expended on an Album, virtually all record labels historically paid lower royalty rates to artists on this less profitable ‘singles’ product. In contrast, the Album, with its relatively small incremental additional costs to manufacture and distribute, but with its 3 to 4-fold higher selling price, permitted labels to achieve a substantially higher profit margin in comparison to the ‘single’, and thus the labels were able to pay a significantly higher royalty rate on albums, including escalations in that rate based on sales success since those profit margins only increased as sales volume went up.

Sony has paid 19 Entertainment a royalty rate for singles that is 25%-35% lower than their album rate. The album rate has the further advantage that, if worldwide sales of 1m are achieved, the royalty increases.

Fuller’s company is furious at the treatment they have received in the download world. First, Sony Entertainment has allowed iTunes to ‘disaggregate’ albums without 19 Recordings’ permission, thus making all tracks available individually. Second, Sony have claimed that these individual tracks should be paid at the reduced ‘records other than album’ rate. Third, Sony are not allowing the sales of these individual tracks to count towards ‘the equivalent of the sale of one Album ... for purposes of calculating sales escalations on that Album’. Consequently, 19 Recordings believe they are being cheated in respect of some ‘albums’ whose disaggregated tracks total the equivalent of 1m sales. There is much in 19 Recordings’ argument. In the online world the costs of manufacture and distribution cannot be used to justify a lower royalty rate for singles. Moreover, the fact that trade bodies are keen to report all online activity as ‘segments’ of albums should surely help 19 Recordings cause.

Given these royalty implications, there must be reasons beyond the financial why record industry personnel remain so devoted to albums. One explanation, perhaps, is that they are not so different to Travis Elborough: they admire the beauty of the LP. This is not as fanciful as it may it first appear. The industry’s major awards, whether these are Grammys, Brit Awards or Mercury Prizes are for albums, and these are (supposedly) based on artistic merit, rather than upon sales. The artists that the industry admires most are those who consistently make important albums. It has commonly accorded greater merit to rock than to pop. Simon Cowell, from this perspective, is not an industry mastermind; he instead suffers from the industry’s snobbery – his artists are consistently frozen out from the most important industry awards.

Of course, these values are as financial as they are artistic. One of the reasons why the record industry praises rock artists over pop artists, and album sales over single sales, is because it is here that longevity lies. And with longevity lies profit. Development costs are paid off and break-even points are achieved. Nevertheless, it is not only consumers who value ‘product’ for its aesthetic worth. Industry personnel work best when they are promoting music they admire. They can also appreciate the beauty of the product itself: industry figures are capable of being spellbound by the look and feel of LPs. Tony Wadsworth, who retired as chairman of the BPI last year, left his post to help set up a vinyl-only branch of the record shop Sister Ray.

There is one further reason for the industry love of albums that mixes the financial with the emotional: patriotism. In 2015, seven of the 10 best selling albums artists were from Britain. In 2014, all 10 were British, the first time this had happened. The situation is different for streaming. The ten most popular streamed tracks in 2015 came from a variety of sources, with only a third of the artists hailing from the UK. This is reflective of a longer historical pattern. For the past ten years the best selling album in Britain has been by an artist from the UK, but the singles charts have been more international. The trade figures issued by BPI downplay the importance of singles by only reporting album sales and album equivalent sales. The triumph of international artists in the singles charts has been decimated, and it has been reduced by a thousand when it comes to streams. Meanwhile, the triumph of British artists in respect of conventional album sales is left to stand as it is. Overall, by kissing the single goodbye and recalibrating streams and individual downloads as albums, these trade figures promote the locals and give a lower profile to the foreigners. The British Phonographic Industry is putting British music first.