Music Sales Fell in 2008, but Climbed on the Web
Article Tools Sponsored By
By BEN SISARIO
Published: December 31, 2008

Sales of recorded music fell sharply in 2008, as consumers continued to migrate away from the CD format, large retailers reduced floor space for music and the recession dampened consumer spending during the critical year-end holiday shopping period.
Skip to next paragraph
Chris Pizzello/Associated Press

Chris Martin and Coldplay had 2008’s No. 2-selling album.
Related
The Top-Selling Albums of 2008 (January 1, 2009)
Music: My Music, MySpace, My Life (November 9, 2008)
Times Topics: Coldplay | Lil Wayne

Total album sales in the United States, including CDs and full-album downloads, were 428 million, a 14 percent drop from 2007, according to data from Nielsen SoundScan. Since the industry’s peak in 2000, album sales have declined 45 percent, although digital music purchases continue to grow at a rapid rate.

The year’s biggest seller was Lil Wayne’s album “Tha Carter III” (Cash Money/Universal Motown), which sold 2.87 million copies, followed by Coldplay’s “Viva la Vida or Death and All His Friends” (Capitol), with 2.14 million. “Fearless” (Big Machine), the second album by the 19-year-old country star Taylor Swift, was third, with 2.11 million. (Ms. Swift also scored the sixth-highest seller this year, for her self-titled debut, released in 2006, which sold 1.6 million copies in 2008.)

The music industry has grown accustomed to dismal sales numbers, and this year even the good news comes with disappointment. “Tha Carter III” is the first release in SoundScan’s 17-year history to top the year-end list with sales of less than 3 million.

Sales of digital music continued to rise steeply last year. Just over a billion songs were downloaded, a 27 percent increase from 2007, and some record companies say they are finally beginning to wring significant profits from music on Web sites like YouTube and MySpace.

But analysts say that despite the growth and promise of digital music — in 2003 just 19 million songs were purchased as downloads — the money made online is still far from enough to make up for losses in physical sales.

“As the digital side grows, you get a different business model, with more revenue streams,” said Michael McGuire, an analyst with Gartner, a market research firm. “But do we get back to where the revenue that the labels see is going to be fully replacing the CD in the next four to five years? No.” Gartner recently issued a report urging record companies to put their primary focus on downloads.

Record companies counter that album sales alone do not give a full picture of the complex new economics of the industry. Rio Caraeff, the executive vice president of Universal Music Group’s digital division, eLabs, said other income, like the fees collected when users stream a video online, had become an essential part of the pie. Twenty percent of Rihanna’s revenue, he said, has come from the sale of ring tones.

“We don’t focus anymore on total album sales or the sale of any one particular product as the metric of revenue or success,” Mr. Caraeff said. “We look at the total consolidated revenue from dozens of revenue lines behind a given artist or project, which include digital sales, the physical business, mobile sales and licensing income.”

Even as most of the industry pushes for greater online sales, two of the biggest albums of the year were by artists who have been vocal opponents of downloading. Kid Rock’s “Rock N Roll Jesus” (Atlantic) reached No. 4 with just over 2 million sales, and AC/DC’s “Black Ice” (Columbia), sold through an exclusive deal with Wal-Mart, was No. 5 with 1.92 million.

Neither act sells its music through Apple’s iTunes, the dominant online seller. AC/DC has said that selling individual tracks breaks up the continuity of a full album. But à la carte downloads are also far less lucrative than full CDs.

At least one sector of the music industry has continued to enjoy robust success: the concert business. Ticket sales in North America in 2008 rose at least 7 percent, to $4.2 billion, according to Pollstar, the touring-industry trade magazine. But in keeping with the trend of recent years, slightly fewer tickets were sold for more money: attendance for the top 100 tours dropped 3 percent, but the average ticket price climbed 8 percent, to $66.90.

The record industry has been eager to share in touring’s bull market, and many of the major labels’ new contracts are for so-called 360 deals, which give the company a much wider share in an artist’s income, from touring to merchandising to product endorsements. But those types of contract are still far from the norm.

Despite the growth of online music sales, CDs remain by far the most popular format, although that hold is slipping; 361 million CDs were sold in 2008, down almost 20 percent from the previous year. About 84 percent of all album purchases were CDs, down from 90 percent the year before.

And since CDs remain the record industry’s biggest profit engine, many analysts worry that the industry will be particularly vulnerable to inventory reductions at retail stores. Big-box stores like Wal-Mart and Best Buy account for up to 65 percent of all retail purchases, and many of those stores are sharply reducing the floor space allotted to music, said Richard Greenfield, a media analyst at Pali Research in New York.

“CDs no longer drive somebody into a store on Tuesday,” Mr. Greenfield said, referring to the day new CDs usually go on sale. “So the big risk for 2009 is that you will see even more rapid contraction of floor space, as CDs really go out of sight, out of mind for the consumer.”

It's scary to think that in five years or so,record companies may stop sellings CDs altogether.It'll become obsolete,just like vinyl.

SoulAlive said:

They will ultimately become a niche item but vinyl has more uses then cds will in the future. Future cars will have SD card slots or ipod hookups as some already have

asg said:

Well now it all makes sense why i'm not bothering with CDs anymore

Well that fail to point out how "digital" is not picking up steam for the "disappeance" of the cd, thats the bigger issue. CD sales are going down because since 2000 you have lost 3 major music retailers and a total of 20,000 stores. And in the coming year one chain will close, another will downsize once again, and another will close its last 10 stores. So when you factor in the fact that there is no where to "SELL" cds, of course you will see the downfall. But like i said when cassettes and vinyl went to cd, sales went up, now that transition to digital is not even in the same ballpark, its not even coming close, thats what has labels shitting.

lastdecember said:

Actually, the article does point out a few times that digital sales are growing at a rapid rate.

The difference between the transition from CD to digital is that you don't actually have to replace your collection to fit with a new format. You can very easily rip your CD collection to whatever format your digital player requires. There is never going to be a boost in overall music sales because of the transition to digital downloads because it's completely unnecessary on the user end to do it.

You could even argue that music sales have been artificially inflated the last 30 years because of format changes.

errant said:

True but the growth is not "rapid" the way they thought, and thats all on the new things coming out, not about replacing old things in peoples collections. Sales are always being inflated, I mean that goes on now when an artist puts out a cd and then 3 months later finds a track and reissues the cd and sells it again, its all the same game. The growth being talked about is not coming from albums, its coming from singles and ringtones and crap like that, which is why you will lose "artists" in this and have a mainstream dictated by Tpain. Even though i hate Kid Rock and dont really like ACDC i applaud their stance on digital "breaking" up of albums. And most importantly, more than anything, digital is yet another step back in sound quality.

lastdecember said:

Actually Tpains new album didnt do too well

But ultimately they will find other revenue streams. The CD sales will continue to go down mainly becoz the single the goin to be the dominant form of release and the album will be just an after thought. And CDs will disappear mainly becoz digital is the most efficient way to sell. You dont need to stock u dont need to return and the user has less hassle handling it and getting hold of digital. All artist will signm 30 contracts and will end up the big losers but its always been like that

asg said:

re: the part i bolded. this is really just a return to how things started out. until artists like the Beatles came along in the 60's, and not even until about the mid-60's when they got serious about being "album artists", the single was the dominant platform, and the album was just an afterthought, or a cobbling together of singles, for the most part.

asg said:

This is why the more seasoned artists will lean towards "exclusives" because they dictate everything, they can even keep iTunes away from the product and not have their albums broken up into 99cent "afterthoughts". And Prince, himself as Billboard has reported is talking to a "major retailer" about the release of his upcoming album(S) to be exclusively sold by them, and the digital release will "only" be handled by his "new" website. This is where its going with the older artists, they are hip to being jerked around.

People who buy music are still going to want physical copies of the music they buy. CDs aren't going anywhere for a long, long time. Hell, even LPs are making a comeback.

I've seen albums being released on those SD cards -- I really don't think that will catch on at all.

I think the drop in CD sales, without the reciprocal rise in digital sales, goes to show that people are just buying less music, period. Some of that might be economy driven, but most of it is probably due to piracy.

Se7en said:

Exactly. As for this article, same shit, different day. NEXT!

Se7en said:

Exactly! Music is a luxury not a need. And many folks just can't afford to spend the extra money on buying it.

Since I'm a music collector- I know for sure- I'm gonna always want a physical product in my hand and on my shelves.

It's not just CD's that are going away. Video games that use discs will be next and DVD's later.

XBOX 360 makes it possible to download games (and extra maps, etc), so in the future the actual stores that the game discs may not be as needed.

Se7en said:

CDs are like a collector's items now. Even hardcore fanbases buy a CD to make their collection complete but they rip the music to their iPods or something and never play the CD anymore. These people are not enough reason for labels to keep on releasing CDs, so even if the CD will not die completely, most artists will not care to release albums on CDs anymore because it's not worth it.

Considering the next year will most likely be a very bad one economically, Obama or not, I guess sales will decrease at least the same amount.

LiveToTell86 said:

I agree that most people rip their music for iPods, but even though they never play the CD they still have it for the future. It not only becomes an instant backup, but one can also sell that CD later if they want (as of today there is no way to sell/transfer downloaded music to others).

Also, just an example: I bought Prince's SST/BNO single from iTunes when it came out (for charity). It sounded OK, but I eventually saw the CD single on Amazon and picked it up. My ripped versions sound infinitely better than the ones iTunes sold. iTunes is better now, but I still notice big diffences in sound quality if/when I buy the actual CD.

Whatever happens, we'll evolve . . . I'm not really into "collecting" anymore, so if the whole system eventually goes 100% download, I'll be OK. I'm more concerned with audio quality and content now.