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Music Sales Take a Beating in 2007

January 16, 2008 by

Album Sales Drop 15 Percent in US

The US-based recording industry suffered a steep decline in 2007. The tracking firm Nielsen Soundscan reported album sales declines of 15% for the year. Nielsen counted albums sales of 500.5 million units during 2007, a marked decrease from 2006 sales of 588.2 million units.

More specifically, Nielsen reported a 19% decline in CD sales, the record industry’s primary product. This represents a faster than expected decline of physical-format sales.

Digital albums are also included in the total album tally (10 digital tracks equals one album), although their impact was modest. During 2007, digital album sales increased 53% to 50 million units, and Internet-based physical album purchases were up 2.4% to 30.1 million.

In terms of top sellers, Josh Groban grabbed first-place honors with album sales of 4.8 million, followed by Hannah Montana (3.9 million), The Eagles (3.6 million), and Carrie Underwood (3.2 million).

Similar Story Worldwide

In Canada, album sales dropped 9.5% to 41.8 million units for 2007, according to Nielsen. Digital album sales nearly doubled to 1.98 million units, up from 1.0 million in 2006. Individual digital track sales increased 73% to 25.8 million units.

In the United Kingdom, total album sales dropped 10% last year, according to trade group BPI. British downloads continued to grow, with paid downloads totaling 77.6 million, up 47.7% from a 2006 total of 52.5 million.

According to British publication The Economist, global estimates of the decline of physical-format sales range from a 6% decrease in the UK, 9% in Japan, France and Spain, 12% in Italy, 14% in Australia, down to 21% in Canada.

Universal Commands Top Marketshare

According to album-specific figures released by Nielsen Soundscan, Universal Music now controls a share of 31.9%, up from a year-ago share of 31.61%. In second-place is Sony BMG, with a 24.97% share, down from a year-ago figure of 27.44%. In third, Warner Music increased to 20.28%, up from 18.14% in 2006. Last place goes to EMI which fell to 9.37%, down from their year-ago figure of 10.20%. Interestingly, independent labels improved to 13.48%, up from 12.61% in 2006.

Paid Download Sales Plateauing?

Paid downloads clearly gained last year, though concerns of a plateau remain. According to Nielsen Soundscan, paid downloads reached 844.2 million units in 2007, a 43% jump over the 2006 total of 581.9 million. The 2006 number represents a 65% gain over 2005 sales of 352.7 million paid downloads.

Most worrisome is the fact that absolute gains are showing softness. In 2007 paid downloads increased 262.3 million, just slightly higher than the 2006 increase of 229.2 million. Paid download performance was similarly flat in the UK where absolute gains were approximately 25 million in 2006 and 2007.

In any case, there is general agreement among music industry experts that the increase in paid downloads is not adequately compensating for the decline in sales of CD’s.

New Year, Same Problems

2008 isn’t starting out any better for the major labels, as first-week sales continued last year’s downward trend. For the period ending January 6th, year-over-year album sales were down nearly 4%, again according to Nielsen Soundscan. Specifically, album sales totaled just over 9 million units, 3.7% below year-ago performance. Within that total, physical-format sales of CD’s declined 16% to 6.14 million units.

Predictably, the digital story continued to show improvement. Paid downloads jumped 31.9% to 28.4 million, a figure boosted by iTunes Store gift cards and new iPod owners.

There is no denying the music business is embroiled in a massive downturn.

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