Music CDs Slide While Downloads Double

December 29, 2005 By Geoff Duncan

Preliminary numbers show music album sales in the U.S. dropped 7 percent in 2005, but the market for music downloads doubled.

Preliminary figures from Nielsen Soundscan indicate music album sales in the United States slumped by 7 percent during 2005 while the music download market nearly doubled during the same period. Considering 95 percent of music is still sold in CD format, the market for digital downloads is creating a significant new revenue stream for the music industry.

According to early numbers, U.S. sales will total about $602.2 million during 2005, down from $650.8 million during 2004. Online music store sales will total roughly $332.7 million during 2005, an increase of 148 percent over 2004. The year’s biggest-selling albums are from diva Mariah Carey and rapper 50 Cent, both selling more than 4.5 million units.

Doing the math, Nielsen’s numbers would seem to indicate that digital downloads accounts for only 5 percent of music sold, but now account for over one third of the music industry’s gross sales revenue.

CD sales aren’t the only things in decline: sales of music videos and DVDs fell by 23 percent compared to 2004. Nielsen did not provide separate numbers for online sales of music videos.

Nielsen Soundscan will release its final 2005 figures in January.

Showing 6 comments

julian davis at 4:05pm 31st October 2006 dvd's sales fell by 23% what were unit sales of dvd's in 2004 and 2005
Ian Bell and Dan Gaul at 2:47pm 2nd January 2006 Here is a good article that explains where Geoff is coming from: http://www.theregister.co.uk/2005/12/31/riaa_2005_...

"Downloads did more than double in 2005. but they still account for less than 5 per cent of total music sales. "
Geoff Duncan at 11:35pm 29th December 2005 I link liberally when I am able to do so. Unfortunately, Nielsen SoundScan typically does not publicly release their figures. So everyone - AP, Reuters, etc. - can only report on what Nielsen says they're saying to their clients. Whether one can trust Nielsen's numbers is an open question.

I wrote: "Doing the math, Nielsen's numbers would seem to indicate that digital downloads accounts for only 5 percent of music sold, but now account for over one third of the music industry's gross sales revenue."

I shouldn't have lumped digital download revenue with CD sales, although that's exactly what Nielsen does. (Music sales via cassette, and vinyl are negligible in SoundScan's reports; DVD is tracked separately.) At the time I was just thinking that the numbers need to omit licensing revenues, etc., which Nielsen doesn't cover.

Another way of phrasing it - but making it even more dramatic and potentially misleading - would be to say that revenue from digital downloads now exceeds half the revenue from CD album sales while accounting for only 5 percent of units sold. That's problematic because of that apples-to-oranges question of what a "unit" might be.

In response to other queries..

I wrote: "Preliminary numbers show music album sales in the U.S. dropped 7 percent in 2005." That's exactly what everyone else is reporting too.

I also wrote: "Considering 95 percent of music is still sold in CD format" which is also being reported elsewhere:

http://news.bbc.co.uk/2/hi/entertainment/4566186.s...
http://www.washingtonpost.com/wp-dyn/content/artic...

"How do album sales drop 7% but still hold 95% of the market??"

The percentages refer to different things. Sales of CDs in 2005 dropped 7 percent from 2004 figures. The sales of CDs sold in 2005 account for 95 of music sold in 2005.
Hugh at 5:24pm 29th December 2005 Found another site posting this story:

"According to Nielsen SoundScan, the information system that tracks sales of music and music video products throughout the United States and Canada, sales of music CDs in the States are down almost 7 percent from last year. Album sales in 2004 totaled 480.6 million; sales through late October of this year reached 446.9 million.

Meanwhile, legal digital downloading shows no signs of slowing down. Nielsen reported digital sales in 2004 of 101 million. Spurred by the iPod revolution, that number grew to 264.4 million this year. There are more than 230 online sites where consumers can buy music legally, up from 50 a year ago, according to the International Federation of the Phonographic Industry. "

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2...

Geoff Duncan needs to pay more attention to what he writes:

"Preliminary numbers show music album sales in the U.S. dropped 7 percent in 2005"

"Considering 95 percent of music is still sold in CD format"

How do album sales drop 7% but still hold 95% of the market??

Your news postings are usually pretty good, but this one was sloppy, please provide links backing up your data.
Tom at 4:02pm 29th December 2005 John...that's exactly what I was thinking when I read this article. But, then again, lots of reporters go for the liberal arts degree because they are weak in math.
john springer at 11:27am 29th December 2005 Total=$600M; Online=$332M,
"downloads total only 5% of music sold but account for 1/3 of the revenue."
WTF??