CD Sales Drop, Digital Sales Falter

As reported by the The Wall Street Journal on March 21 (three weeks ago, sorry for being behind the ball), CD sales for the first quarter of 2007 were down an alarming 20% compared to the same time one year ago. Digital sales of songs (I repeat: songs, not albums) have not fallen as sharply as CDs as far as raw statistics are concerned, but their sales haven't exactly picked up the slack left by the endangered species known as CDs. According to Nielsen SoundScan, online digital song sales are actually up 54% from a year ago to 173.4 million units so far in 2007, but that is still not enough to make up for the lost revenue. Overall, music sales are down 10% from last year.

We've seen this before. It's been happening for the past seven years or so. Should this news be shocking? While it is encouraging to see that digital sales are at least holding steady and still growing, executives are unhappy with the rate of growth. Sales just aren't meeting expectations.

Record stores are closing left and right. Tower Records, once a powerhouse in the music sales market, has gone bankrupt and closed down. Altogether, 800 stores shut their doors in 2006. This is appalling and unbelievable to the avid record buyer, but not so much to people of my generation. Not to say that Generation Y, the "always on" generation, doesn't buy records...Just not in the volume that the record industry is used to. Ever since the Internet became popular and file-sharing was introduced, however, this should have been forseeable. But no one really wanted to believe that the death of the CD was possible. Record companies failed to embrace the digital age and come up with back up plans just in case something like this actually happened. The big box retailers like Wal-Mart and Best Buy that have gouged smaller music-focused stores are noticing the downfall and are devoting less and less floor space to music. There are fewer and fewer places to sell CDs anymore. A falling demand means a falling supply, and it seems very likely that the CD will soon become an antique.

Digital music was supposed to be the answer. iTunes was going to save the record industry. Not the music industry, but the business of selling records. That's what record labels do. Artists are their business, but their business is not succeeding anymore. Money is no longer made by selling records. No, revenue is now generated by live shows and merchandise, among other things. Artists used to be able to leave the record label out of this part in their contracts; in other words, artists used to keep a solid percentage of what they generated from ticket and merchandise sales. Now that CDs aren't making any money and frankly cost more to produce than what they recoup in most cases, contracts are being written to take away more and more from the artists in terms of touring and merchandise profits. They are becoming desperate and are looking for other ways to scrape some cash, unfortunately usually from their artists. The problem is that they have been slow to develop other ways to make money. Ringtones looked promising but those sales have begun to slow down as well.


But why is it that stealing music is so popular? After all, it is stealing. Theft. Not a whole lot of people would have the guts to illegally take products straight from a store's shelves, but millions are willing to do it electronically in the safety of their homes. Is it any different just because there is comparably little risk of getting caught? This has been the issue. Is it that people just don't realize that it is stealing? Perhaps becuase so many people do it makes it a little easier for others to. Peer pressure, in a sense. It dumbfounds me. It is so easy to become absorbed in ourselves and not think of the consequences stealing music can have for the artists. Not to say that I have never illegally downloaded music. Oh, I have. But there has been a great deal of hesitation and I do think about my actions. But still! It's just so easy! We live in a world of convenience, and we expect to get music for free even if by illegal means.

Consider the other side of the argument, one that could be made by proponents of file-sharing: If CDs are at a point where they hardly generate any money, why is it so bad to just download the songs for free that aren't making the artists any money anyway? And, isn't file-sharing a form of promtion, especially for small-time artists trying to get their name out?

Hmmm. Good point.

As long as there is a debate there will at least be two sides, and there will never be a consensus. This is where the industry, the music loving world, makes a decision. It must be decided that:

1) Yes, CDs are dead. There is no longer money to be made in the record business, and music should turn into an unprotected public utility, available in unlimited quantity as long as a monthly fee is paid (that's just an idea).

2) Or, NO! CDs are not dead, and we are going to find our way through this!! There will be a federally-backed shutdown of all file-sharing sites domestic and international, and digital music will be dripping with DRM.

The recent trend is moving towards a DRM-free world, but that doesn't mean much right now. The future is still up in arms. I have a hard time believing that the major labels will accept "defeat" and realize that they can't make the money the way they used to. Anything is possible though.

So where does this leave the Internet, more specifically, social networking sites? Well, if the industry shifts into a "music-like-water" plan where music is abundant and cheap and easily distributable, then the Internet will continue to be the Godsend that many think it is. MySpace, Facebook, YouTube and every other social network will be a means of promotion like it is now, but without any restrictions. This will definitely be beneficial for bands trying to spread the word. If the industry falters and does little to change, though, the Internet will be caught in between much like it is now, constantly walking the fence. Until everyone can get on board with one idea and fully commit, there will always be disagreement.

Social networking promises to be a tool that can be utillized by all players, both artists and labels, to promote new music and inform people of tour dates and other venues that can produce income. It is as much a part of the upcoming generations (including my own) as producing offspring was for the Greatest Generation. While CD sales continue to plummet, it may be time to embrace this and reinvent the music industry.