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Grammys Spotlight Digital Music

Monday, 1 Feb 2010 | 10:39 AM ET
New iPod Nano
Source: apple.com
New iPod Nano

With the Grammys coming Sunday, and Apple's big iPadrelease just a few days old, it's a good opportunity to take a look at just how far digital music has come, and what a big role Apple has played in all this.

Sure, Steve Jobs announced this week that Apple has now sold its 250 millionth iPod, and assuming the momentum continues, Apple will only tighten its strangle-hold on digital music. The iPod/iTunes/iPhone ecosystem may go down as one of the top innovations of the 21st Century. It saved an industry, spawned enormous creativity and revolutionized consumer habits. Music labels might be complaining about Apple's "control" over the medium, but the only reason those labels even have a voice to complain today is because Apple and Steve Jobs bailed them out. Simple. Genius.

Nielsen SoundScan, Nielsen Broadcast Data Systems and Nielsen VideoScan are out with some new stats about digital music, that ahead of the Grammys, bear some examination and reflection. They are extraordinary.

*40 percent of all music purchases were done digitally in 2009, up from 32 percent a year earlier.

*Lady Gaga is a bonafide phenomenon with more than 15 million digital tracks sold so far. Extraordinary.

*Beyonce's Album of the Year nominee has sold 2.7 million copies so far, and 10.9 million track sales; the Dave Matthews Band's nomination has done 1 million copies, and 750,000 digital tracks sold.

Vanessa Thomas is SVP at Nielsen Entertainment. I spent some time with her on the phone this morning talking about these trends, and she says they'll only accelerate. That's particularly good news for Apple, still the world's top music retailer, but also for the likes of Best Buy, Amazon.com, even walmart.com and Target. It could also be a nice barometer for companies like Netflix, because as digital music goes, so might go the rest of digital entertainment, most notably movies and other videos.

What about the growing chasm between new stars easily embracing the new realm of digital distribution, and artists who clearly appeal to an older demographic, like Josh Groban and even Susan Boyle? This is intriguing: On the digital front, they didn't even make the Top 10, even though their CD sales did much better. That's a message being digested by labels as they try to figure out new artists to sign and what their shelf lives might be.

"Lady Gaga's fan base is massive," she says. "She's generated such a buzz online with social networking. It's incredible."

She tells me the Grammys "are a very powerful tool for winners and non-winners. It can launch careers, revitalize careers," and she points to Allison Krauss and Robert Plant after their appearance last year that juiced their sales by 3,000 percent. Same goes for Herbie Hancock a year earlier.

But clearly, the trends are electronic, and for those artists appealing to a younger demo, embracing the digital distribution model, the rewards can be substantial, not just for the bands and the content creators, but those tech companies who are getting this material from online stores to the MP3 players in your pockets. Lady Gaga will open Sunday's show. It should be a good one.

Questions? Comments? TechCheck@cnbc.com

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