US-Based CD Sales Plunge 13 Percent During 2006

  • Save

US-based sales of CD albums plunged 12.9 percent last year, according to figures released by the Recording Industry Association of America (RIAA) this week, marking the largest ever decrease for the format. The decrease complements information recently released by Nielsen Soundscan, which shows that overall physical sales were worse, dipping a pronounced 13.8 percent. Broader music sales, which include digital and mobile formats, landed at $11.5 billion for the period, down from a year-ago total of $12.3 billion.

The RIAA figures are based on unit volume and suggested list price calculations, an estimate that could cloud various pricing discounts. Meanwhile, digital and mobile sales climbed significantly, though the severe physical drop left little room for an offset. The digital category contributed $1.6 billion in sales last year, up from $1.3 billion in 2005. Of that, mobile transactions accounted for $774.5 million, powered largely by master ringtone sales.

The information could signal the beginning of a tailspin for major record labels, whose revenues are heavily drawn from CD-based albums. And recent data suggests that the downward spiral is accelerating. During the first quarter of this year, CD sales dropped 20.5 percent, according to information released by Nielsen Soundscan.

These declines could accelerate a number of initiatives, including a potential shift away from DRM protections on digital products. Of the majors, EMI has already taken that plunge, though it remains unclear how the others will proceed. The CD sales drops may also inject more anxiety into licensing negotiations between the majors and iTunes, set to conclude at the end of this month.

Meanwhile, non-traditional labels and concepts continue to emerge, including those tied to the CD. Just recently, Starbucks unveiled its Hear Music record label and announced its first artist, Paul McCartney. Others, including Time Life and Toronto-based Somerset Entertainment, are also pushing non-traditional, CD-based models.

The shift towards digital music sales has been a long time coming, and it’s not just because of convenience. Digital music provides consumers with more options to purchase individual tracks, rather than entire albums, and this has disrupted the traditional music industry business model. With the rise of music streaming services like Spotify, Apple Music, and Tidal, consumers are also less likely to buy physical copies of albums.

The decline in CD sales has also had an impact on the music industry workforce. In 2001, the peak year for physical album sales, the music industry employed 157,000 people in the US. By 2015, that number had dropped to 89,000, with the majority of those job losses coming from the retail sector.

However, the decline in CD sales has also led to increased creativity in the music industry, with artists finding new ways to connect with their fans and monetize their music. Some have turned to touring, merchandise sales, and endorsement deals to make up for lost revenue. Others have found success in the world of sync licensing, where their music is used in films, TV shows, and commercials.

Despite the decline in CD sales, physical music formats are not completely dead. Vinyl sales have seen a resurgence in recent years, with sales reaching their highest level since 1988 in 2019. Record Store Day, which began in 2008, has helped to drive interest in vinyl and has become a major event for music fans around the world.

In conclusion, the decline in CD sales is a sign of the changing times in the music industry. While it may signal the end of an era, it has also led to increased creativity and innovation in the industry. As the shift towards digital music continues, it will be interesting to see how artists and labels adapt to the changing landscape and find new ways to connect with their fans.