An Analysis of 47 Million Transactions Tells an Amazing Story about the Music Business

Forget about streaming—physical merchandise is now the key to success

Half the people buying vinyl albums don’t own record players. They treat their albums like holy relics—too precious to use and merely for display among other true believers.

Readers were shocked when I recently reported that statistic. I was a little stunned myself. But those are the facts.

Of course, there’s a lot about the vinyl revival that defies logic. What other business relies on a 60-year-old storage technology? That would be like running my writing career with a teletype unit and mimeograph machine.

And it’s not just vinyl. Cassette tapes—a cursed format that always unraveled at the worst possible time—are hot again. Even 8-track tapes, a longtime target of ridicule and abuse, are selling for thousands of dollars.

Why are people buying this stuff?

A new research report from Andrew Thompson at Components, released earlier today, helps us understand the bigger picture. Thompson analyzed 47,703,022 Bandcamp sales—involving almost five million items. And what he learned was startling.

Success in the music business is all about selling physical objects.

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This is an unexpected situation—and runs counter to everything we’ve been told.

The Internet supposedly killed physical music media more than two decades ago. After iTunes was launched in 2001, there was no looking back. At first the music industry pivoted to digital downloads, and then everybody in the business jumped on the streaming bandwagon.

But it’s now 2023, and streaming platforms still aren’t profitable. However, Bandcamp is—and now we know why.

It’s all about tangible items.

Consider this chart—which looks at the correlation between revenues on Bandcamp and an artist’s reliance on physical merchandise.

Source: Components

Vinyl helps drive this. But it is only just part of a larger story. Artists can sell everything from clothing to compact discs on Bandcamp. And, of course, they can sell digital tracks too.

But the numbers make clear that physical merchandise is the smart business model.

According to Andrew Thompson:

Why is Bandcamp profitable and Spotify not? The answer we arrived at was that Bandcamp provides a simple platform for complex transactions, while Spotify is a technically complicated platform for facilitating a single transaction in the form of the one-size-fits-all subscription.