U.S. CD Sales Down 20 Percent

New figures from media research group Nielsen SoundScan claim that U.S. sales of music CDs declinedby 20 percent in the first quarter of 2007 compared to the sale period a year ago, underscoring the music industry’s sentiment that digital music downloads are undermining their business. SoundScan also offered figures for digital music sales, noting that while sales of digital albums fell during the same period, the sales of digital music singles actually rose. The numbers may indicate a fundamental shift in the music industry away from album-based sales to a singles-driven, digital market.

According to SoundScan, from January 1 through March 18, 2007, the music industry managed to sell 89 million music CDs to U.S. consumers, compared to 112 million CDs sold during the same period of 2006. Digital album sales were also down year over year, from 119 million in 2006 to 99 million during the first quarter of 2007. However, digital sales of individual tracks actually increased year-on-year, cloing from 242 million tracks during the first quarter of 2006 to 288 million tracks during the first quarter of 2007.

Music industry figures have shown a steady decline in music CD sales over the last several years; however, music CDs still account for more than 90 percent of all album purchases. Nielsen’s combined CD and digital album sales figures (which the company estimates by considering every 10 digital tracks to be an album) show overall album sales down 10 percent during the first quarter of 2007.

The drop in album sales and rise in the purchase of individual tracks highlights the popularity of a la carte music selection, whereby music fans can choose to purchase just to two or three songs from an entire album rather than buying every track. From the perspective of the music industry, however, these track-by-track purchases create a significant revenue shortfall: where in the past those consumers would have generated revenue equivalent to an entire album’s worth of sales, now they only offer a small percentage of that revenue. The trend may signal a fundamental shift for the music industry, away from album-based marketing and sales and into a system driven by the sales of individual tracks, promoted aggressively in online communities and services.