Music business ends year on another weak note

A man looks at music CDs inside the Virgin Megastore in New York November 26, 2007.

NEW YORK (Billboard) - Just when it seemed erosion of music sales during the holiday season couldn't get worse, December snowstorms compounded the retail industry's misery.

Album sales for 2007 are now down 15.3% for the year, compared with 2006. But for the four weeks beginning with Thanksgiving week and ending December 26, U.S. album sales were down 20% to 84.2 million units from 105.3 million a year ago, according to Nielsen SoundScan.

The last week before Christmas didn't help matters much, with sales totaling 25.6 million vs. 31.3 million units in the same period last year.

The season got off on the wrong foot when Thanksgiving sales failed to ignite due to a lack of new hit titles, with retailers reporting anywhere from 5% to 15% comparable-store declines. And then Mother Nature blew in.

"It just makes things worse in one of those already bad holiday selling seasons," says Rob Perkins, president of Marietta, Ga., chain Value Music.

Snowstorms are to be expected at this time of the year, but a December 5 shooting in an Omaha mall "led everybody into a malaise for about a week," says Mike Fratt, who heads up the six-unit, Omaha, Neb.-based Homers chain.

In Brighton, Mass., Newbury Comics CEO Mike Dreese says sales were down 80% on December 16 -- a decline he attributes to snow and a New England Patriots game keeping people home.

Beyond the weather, a lack of big hits is grated on retailers' nerves. "I was astounded: There was no CD to give as a gift," Dreese says. "I have never seen that before."

The formula for holiday selling success is a plethora of obvious hit titles and a couple of surprise hits, and this year retailers have had few of the former to rely on. But at least one title has far exceeded expectations: Since its October 9 release, Josh Groban's Christmas album "Noel" has sold 3.6 million copies, according to Nielsen SoundScan; it is now the top-selling album of the year.

Indie retail chains are also citing Lupe Fiasco's "The Cool," Robert Plant & Alison Krauss' "Raising Sand" and Mindy Smith's "My Holiday" as strong sellers. And Fratt reports that Homers has sold "a ridiculous amount" of the Eagles' "Long Road out of Eden" and the Tom Petty "Runnin' Down a Dream" DVD, which, respectively, are exclusives at Wal-Mart and Best Buy.

Eric Levin, who owns the Criminal Records indie store in Atlanta, says this year's dearth of hit titles inspired the chain to move its usual January sale on its top 100 titles up to December 1. That change, he says, has helped the chain increase sales by 8% so far in December.

One bright spot across the board, retailers and wholesalers say, has been online physical sales. Dreese says December will be Newbury Comics' first $1 million month for its Web store.

DVD sales, meanwhile, were flat, though retailers had expected them to be up slightly. And while videogames had a decent December, merchants say, sales could have been better if enough Wii game systems or "Guitar Hero" games had been available.

But for music, retailers say, the message is clear. "Unless we get some innovation put into physical music," Value Music's Perkins says, "we will see a continuing of this bad sales trend."

Indeed, senior executives at two of the major labels say they are forecasting a similar drop in CD sales for 2008. The decline could be accelerated by a continued reduction of shelf space devoted to music. Retail executives say they are unsure how poor sales will affect such matters in 2008, but 2007 saw a number of chains reduce music space to expand other product lines.

Reuters/Billboard