Amid digital boom, indie labels eye retail sales

LOS ANGELES (Billboard) - When Montreal-based rock group Arcade Fire's "Neon Bible" debuted this week at No. 2 on the U.S. album charts with sales of 92,000 units, 27,000 of those were sold digitally, according to Nielsen SoundScan.

That 30% figure is a level that the indie community is hitting with regularity.

See the Shins' "Wincing the Night Away," which also debuted at No. 2 recently, with 30% of its 118,000 first-week sales coming from the digital sector, or Bloc Party's "A Weekend in the City," which arrived with digital albums comprising 33% of its 48,000 first-week units. On a smaller scale, San Francisco-based art-punk band Deerhoof's "Friend Opportunity" sold 33% of its 6,000 first-week units online.

Digital sales volume in its many configurations now accounts for 15% of total U.S music sales. Though Nielsen SoundScan reports CD sales down 20.3% this year, to 81.5 million as of March 11, album downloads have totaled nearly 9 million, a 56.4% increase over the same period last year. That equals nearly 10% of all U.S. album sales.

Yet despite the figures, a number of top indie labels insist that the fast-rising digital sector is not affecting their manufacturing calculations.

"We can pretty much count on the digital percentage being greater with each release than it was last time," says Andy Kotowicz, head of sales at the Shins' Sub Pop label. "But right now we still spend most of our resources on trying to get people into stores and buying the physical records we shipped. There's not much of a risk in having people not download a record. There's much more a risk in getting records returned."

Drag City head of sales Rian Murphy concurs. Unlike the majors, which cite file sharing as the main culprit for declining sales, the Chicago-based home of the High Llamas and Joanna Newsome is experiencing a growth spurt. Digital sales, Murphy says, rarely enter into the equation in setting up an album's retail plan.

"We're not looking at digital numbers to analyze sales prospects," he says. "We look at what we've sold, in terms of LPs and CDs on the last record, and we formulate from there. The digital does not seem to affect the number of real copies we sell. It's a happy thing. Digital is growing, but is not necessarily shrinking the other sides of the market for us."

And the digital attention surrounding a new indie release is helping indies get albums in larger accounts such as Target. A sales exec with one indie distributor notes that it now places two or three titles per month at Target.

"Three years ago we were only putting a couple of records a year into Target," he says. "That's an interesting phenomenen. They're paying more attention to the social networking sites. There's some value, if we can articulate the traffic these sites are seeing in the same way accounts used to look at radio."

Indeed, in setting up the forthcoming album from indie rapper El-P, Definitive Jux is hoping the artist's success in the online world will result in larger orders from the big-box retailers.

"To a degree, everyone has worked themselves up to a lather over the digital world," Definitive Jux CEO Amaechi Uzoigwe says. "But I'm more concerned about Best Buy and getting them to truly understand this record. They need to understand this record because that's where the money is. It's not in digital."

Representatives from Best Buy and Target did not return calls.

The digital retail sector, some labels say, won't truly become a factor until iTunes gets some hearty competition.

"The big question is why aren't there more record stores online," says Adam Shore, general manager at Bloc Party's Vice Records label. "The physical stores close all the time, but everyone still shops at one digital store. It's just crazy. I feel a lot of the retail environment will change when every Web site is a store. Everything you see on a blog, you should be able to buy."

Reuters/Billboard