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Music biz hears sour notes
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January 9, 1997: 4:04 p.m. ET
Album sales growth was flat in '96; Internet use eats into buying time
From Correspondent Rhonda Schaffler
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NEW YORK (CNNfn) - Alanis Morissette will remember 1996 fondly. Her Jagged Little Pill became the best-selling album of the year. But few others in the $12 billion recording industry will have such fond recollections of last year.
The industry seems stuck in a rut as growth was nearly nonexistent in 1996. Even the much-hyped second albums from Hootie and the Blowfish and Sheryl Crow - big sellers with their first recordings in 1995 - didn't do too well at the cash registers.
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According to Dennis McAlpine, an entertainment analyst with Josepthal, Lyons, & Ross, there are three primary reasons for this dramatic decline. (207K WAV) (207K AIF)
- There is not enough individual artist appeal, resulting in a decrease in "mega hits;"
- There is no distinct "sound" in the industry; and
- There has been a decrease in new act promotion generated through avenues like MTV.
Make no mistake: there were more CDs and tapes sold in the United States during 1996 than ever before.
But the pace of sales growth slowed to a virtual standstill. Compare that to the go-go years of the 1980s and early 1990s when consumers were replacing their vinyl albums with CDs at double-digit growth rates.
The buying slump is not only affecting recording companies. It's started to hurt record stores. They multiplied like rabbits when business was good, but now find there are too many stores vying for not enough consumer dollars.
"While the total number of albums produced has at least stayed the same or increased slightly, the profit margins available to retailers have been decreasing," said Michael Fine, chief executive of SoundScan,
This was underscored recently when Viacom said it was closing 50 Blockbuster music stores. It's also why several other music store chains have filed for bankruptcy protection in the past two years, analysts said.
Retailers have another problem to contend with as well. Companies like Tower Records are finding that there simply is more competition for consumers' time and money spent on entertainment.
Movies in theaters and on video continue to take a chunk of consumers' time. Add to that the explosion of Internet use in the past two years, and one has a consumer population that no longer can increase the amount of time it spends buying music.
This is why music executives hope 1997 brings something good like a break-out artist or a break-through sound. Indeed executives would probably take a break-through of any kind. 
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