Digital downloading increases music sales -- The music industry is rethinking how it sells music after Gwen Stefani hit No. 1 without much radio play

By Raymond Fiore and Michael Endelman
July 01, 2005 at 04:00 AM EDT

How did pop singer Gwen Stefani’s single ”Hollaback Girl” hit No. 1 on Billboard‘s Hot 100 in April without ubiquitous radio play? With the click of a mouse. Stefani’s three and a half minutes of delicious cheerleading drama is chanting another message: The digital-track biz is officially b-a-n-a-n-a-s and changing the way fans get their (legal!) pop-music fix.

After nearly disappearing from record stores, the oldest of music industry products — the single — is enjoying a major renaissance. ”Singles are more alive than ever, in a way we’ve never seen in the history of recorded music,” says Atlantic Records cochairman Craig Kallman. With the growing popularity of legal downloading services like iTunes and Napster, the à la carte song is once again an economic boon for record labels after years of decline: Though CDs still drive the music industry, digital tracks, at 99 cents a pop, have grossed hundreds of millions of dollars. ”It’s already an amazing revenue stream,” says Daniel Kruchkow, VP of digital media for Def Jam. ”It’s helping stem the losses from piracy.” Even more significantly, singles are rewriting industry rules for releasing, distributing, and marketing music.

Throughout the ’90s, sales of physical singles shrank drastically as labels struggled with changing formats. Then came the onslaught of illegal peer-to-peer file-sharing programs, which caused a musical free-for-all in the late ’90s. All of which led labels to begin phasing out singles. According to Nielsen SoundScan, conventional single sales plummeted from 135 million in 1997 to 7.4 million in 2004. But digital downloads, monitored since 2003, have skyrocketed (see chart).

The impact of digital tracks is clearly visible on Billboard‘s Hot 100 chart, a combination of radio audience and overall single sales that’s the arbiter of mass-market popularity. Though the past few years have seen the top 10 ruled almost exclusively by radio-hogging hip-hop and R&B hits, the power of downloaders, who sample all genres, is now being felt: Witness recent top 20 debuts from Coldplay and the Dave Matthews Band. ”It’s easier for rock songs to reach higher positions [now],” says Billboard‘s Geoff Mayfield. ”The Killers made the top 10. That would have been very difficult before digital sales.”

The advantages of downloading for labels are very clear: It provides marketing aid, offering an instant clue to which tracks are rocking fans’ worlds. And the virtual distribution eliminates expensive manufacturing and shipping costs. ”It’s incredibly easy. It’s a conversation and then just uploading the song,” says V2 Records president Andy Gershon, who released the White Stripes single ”Blue Orchid” to iTunes two weeks after it was recorded. But there are advantages for the artists as well, allowing them ”to be as productive as they want to be, without the constraints of an album,” says Gershon.

Ironically, the success of the digital single could turn the clock back to rock’s dawn in the 1950s, when songs — not albums — were the currency of the pop universe. ”[Digital] platforms haven’t even begun to reach critical mass and penetration,” says Atlantic’s Kallman. ”We haven’t begun to scratch the surface yet.”

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