October 6, 2007 / 7:52 AM / 11 years ago

Music biz limps to tepid fourth quarter

NEW YORK (Billboard) - Nine months into 2007, CD and total album sales are still dropping — just not as quickly as they were plummeting when the year began.

But industry executives are predicting that even the relative slowing of the sales decline probably won’t be sustained by what is now a slim fourth-quarter release schedule.

Third-quarter sales data released by Nielsen SoundScan show overall album sales down 14.2% and CD sales down 18.5% for the year so far, compared with the first nine months of 2006. For the third quarter alone, CD scans slid 6.8% to 94.9 million from the 114.2 million counted in last year’s third quarter.

Compared with the 20.5% drop that shocked the industry in first-quarter 2007, that figure could almost be considered a recovery; CD sales, in fact, have been slowing their decline through the year. In the second quarter, the format had dipped 17.9%, from 122.3 million units to 100.4 million.

But so far, retailers say, fourth-quarter prospects don’t look promising. “Although we got a decent amount of rap titles coming, we need some rock and pop titles in the worst way,” one retailer says. “The rock schedule is beyond a disaster at this moment.”

Another retailer says, “Other than Universal (Music Group, the industry leader), I am still waiting for the majors to come to the plate with some big records.”

COUNTRY’S CONUNDRUM

Among popular genres, country has shown the most significant drop-off so far this year: Album sales dipped 26.1% to 37 million units, from the 50.1 million units the genre generated in the first three quarters last year. A primary reason for country’s decline, label representatives say, is the sluggish business experienced in 2007 at Wal-Mart, where country sells a disproportionate amount of records. According to the Wall Street Journal, for 10 years through 2005, the mass merchant’s sales gains at stores open at least one year averaged 5.2%. So far this year, Wal-Mart’s comparable-store sales are up just 1.3%.

Country is also lagging behind other genres when it comes to transitioning to a digital retail model. Total digital album sales stand at 35.8 million downloads so far this year — or 10.6% of overall album sales. That’s up from the 22.6 million digital album sales accumulated during the corresponding period last year. But in country, digital album sales comprise only 5.2% of the genre’s total album sales so far in 2007, less than half of the industry average.

Other genres underperforming digitally include Latin, where album downloads account for 1.5% of the genre’s sales; classical, at 8.5%; R&B (including rap), at 6.4% of sales; and rock subcategory hard rock, at 9.6%.

The rock category as a whole, however — and especially another of its subcategories, alternative rock — is dominating the digital format. In 2007 so far, rock’s digital album sales comprise 13.7% of that genre’s total album sales, while alternative rock’s digital portion stands at 15.7% of its total.

Speedier conversion to digital and better genre sales success don’t always go hand in hand, however. If you exclude rap sales from its total, only 6% of R&B albums were sold digitally this year. Yet if you define it that way, R&B is still the industry’s healthiest genre of 2007. The genre has declined only 2.8% to 36.3 million units from the 37.3 million it generated in the first nine months of 2006. On the other hand, rap is down 25.4% to 31 million units from the 41.6 million it had sold at this point last year.

DIGITAL DOINGS

In general, the latest developments in the surging digital channel — including Amazon’s September 25 launch of its digital-download store and Apple’s foray into wireless downloads — are at least partially offsetting label executives’ worries about the future, if not offsetting CD sales.

Industry executives also see some hope in the growing number of total music units sold, which increased 16.8% in the first nine months of 2007 to nearly 1 billion — 951.3 million, to be exact — from the 814.6 million total units Nielsen SoundScan counted in the corresponding period last year.

Fueling that increase, digital track downloads stand at 612.2 million, up 46.3% from the 418.6 million scanned during the first nine months of 2006. So far this year, 26 track downloads have broken the million-unit mark; last year at this time, only 10 tracks had hit the million-unit milestone. In contrast, 20 albums have broken the million-unit sales mark so far this year (digital and physical combined), versus 28 titles last year.

Overall, when the 61.2 million track-equivalent albums sold in the first three quarters of 2007 (using a formula where each 10 digital tracks sold counts as an album) are added to the 35.8 million digital albums sold, the digital format now totals 97 million digital album-equivalent units — or 24.3% of the 398.6 million album units tallied when track-equivalent sales figures are added to physical album scans.

Meanwhile, in the digital album format, so far this year 14 titles have broken the 100,000-unit sales barrier — led by Maroon 5’s “It Won’t Be Soon Before Long,” which has slightly more than 223,000 scans. Last year, in the corresponding time period, only six albums had achieved that digital sales distinction.

Universal Music Group VP of sales analysis David Bakula points to another notable digital achievement. In the second quarter, Maroon 5’s release became the first to hit 100,000 digital downloads in a week. And in the third quarter, Kanye West’s “Graduation” upped the ante when it scanned 132,000 digital albums in its debut week.

“The 102,000 digital downloads of the Maroon 5 album was almost 25% of the release’s market share in the first week,” Bakula says. When digital can hit 25% of a big-selling title’s market share, he says, “it almost seems like we have reached the tipping point. All of a sudden, digital is your biggest account, and that is something we have never seen before.”

Reuters/Billboard

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