Industry Ponders CD Sales Cliff, Post Physical World

Are CD sales headed for a cliff this year?

Sales tallies from the first few weeks of this year have certainly supported that notion, particularly in the United States.  During a keynote presentation in West Hollywood on Thursday, Yahoo Music chief David Goldberg pointed to a 20 percent drop in 2007, a prediction that is being driven by several forces.  On the consumer side, demand is sliding away from a commodity that combines predefined bundles and higher price points.  But Goldberg asserted that retailers themselves will also accelerate the decline.  Big-box retailers like Wal-Mart and Best Buy have traditionally positioned CDs as loss leaders, a strategy that helps to generate extra foot traffic.  But softened consumer demand could decrease the emphasis on that approach.  “Once CDs stop drawing people in, there’s less reason for stores to keep large collections on their floor,” Goldberg noted.  The result will be less opportunities for consumers to make impulsive CD purchases.

But the shiny disc still has staying power, despite the gloomy forecasts.  Sales have been decreasing year after year, though the numbers so far suggest a slowly-leaking balloon – not a pop.  On Wednesday, a focus group of teenagers and twenty-somethings hadn’t entirely abandoned CDs, though they did reserve purchases for favorite artists.  “I’ve purchased every one of Shawn Carter’s albums,” one participant said while pointing to lures like album art, organized track listings and better sound quality.  But the specter of a flattened physical is now looming, and Goldberg pointed to markets like Taiwan and Korea, both of whom have experienced physical drops of about 70 percent over a 3-4 year period.  For the most recent week, album sales were 14 percent below year-ago tallies, part of a multi-week trend.