The suit-and-tie look works for Justin Timberlake. His album The 20/20 Experience sold 980,000 copies in its first week, according to Nielsen (NLSN) SoundScan. That’s 63 percent more copies than RCA (SNE), Timberlake’s record label, expected—and a figure most artists haven’t touched in years. Even Adele’s 21, the top-selling album of the past two years, enjoyed a mere third of Timberlake’s sales during its debut week. And what’s remarkable is how much of The 20/20 Experience’s sales can be credited to one of the recording industry’s biggest bêtes noires: the free online streaming service.
Many of music’s biggest acts still haven’t warmed up to streaming services such as Rdio and Spotify. The Beatles aren’t on Spotify. Neither is AC/DC. When Coldplay’s Mylo Xyloto debuted in 2011, the band refused to put the album on Spotify for four months, choosing instead to work with Apple’s (AAPL) iTunes and Amazon’s (AMZN) MP3 store. But Timberlake’s 20/20 is streaming for free everywhere. This week it took up six of the top 10 most played songs on Rdio. On Spotify it was streamed nearly 7.7 million times, making it one of the most popular albums ever to appear on the service. It also became the most preordered and the fastest-selling album in iTunes’ history. That might be because a week before 20/20 was released, RCA streamed the album in its entirety on iTunes.
ITunes started previewing albums in 2011 with Red Hot Chili Peppers’ I’m With You. After the free stream, digital sales of its first single, The Adventures of Rain Dance Maggie, doubled. I’m With You then debuted at No. 2 on Billboard and sold more than 200,000 copies in its first week. Since then, everyone from Soundgarden to David Bowie has experimented with what’s essentially a controlled leak. “It’s sort of ironic that the company that’s streaming albums first is still a digital download site,” says Mark Mulligan, a digital-music analyst. “But that’s because iTunes has 400 million active credit-card accounts and Spotify doesn’t.”
In many ways, streaming services have replaced traditional radio—they’re destinations where listeners can test an album before they buy it for their smartphone library. Free online access has become part of record companies’ marketing strategies. But there’s evidence that streaming may eventually replace MP3 downloads altogether, which has already happened in Sweden, where more than 90 percent of digital music is streamed rather than downloaded. “But that’s a long, long time from now for the U.S. and most of Europe,” says Mulligan. Regardless, album sales have remained more or less flattened over the past year, according to data released by the Recording Industry Association of America earlier this week. Meanwhile, revenue from subscription and ad-supported streaming services rose 59 percent last year, from $360 million all the way up to $571 million.
If streaming services do take over, the music industry could face a major problem. So far the services generate little money for artists. Pandora (P) claims to pay major artists sizable incomes, but Spotify pays less then half a cent per listen, the New York Times reported. That means that from the 7.7 million listens of The 20/20 Experience, Timberlake will earn just $32,000.
No wonder he and Jay-Z are spending their summer on a giant tour.