CNN/Money One for credit card only hard offer form at $9.95 One for risk-free form at $14.95 w/ $9.95 upsell  
News > Technology
graphic
CDs stage a comeback, but can it last?
Music industry sees CD sales rise, rate of digital downloads levels off.
July 6, 2004: 4:50 PM EDT
By Krysten Crawford, CNN/Money staff writer

NEW YORK (CNN/Money) - Music CDs may not be headed the way of Betamax videotapes after all -- at least not yet.

Suggesting reports of the compact disc's demise may have been greatly exaggerated, sales of music CDs are on the rise again. According to Nielsen SoundScan, Americans bought nearly 300,000 CDs in the first quarter, up 8.5 percent from a year earlier.

The sales uptick, which actually began near the end of last year and has since held steady, means 2004 could see the first increase in CD sales in two years. The growth comes amid signs that the rate at which consumers buy from online music stores like iTunes, an Apple Computer (AAPL: down $0.13 to $30.95, Research, Estimates) service, appears to be flattening.

"The CD was supposed to be gone by now," said Geoff Mayfield, a senior analyst at Billboard magazine, referring to recent prognostications. "But I suspect people are going to be buying CDs for a while yet."

The news is certainly encouraging for the battered music industry.

After a blockbuster 2000, record companies saw total album sales slump in each of the next three years.

By the end of 2003, total sales of albums, which are mainly in the form of CDs but also include vinyl records and cassette tapes, were off 13 percent from 2000, to 687 million units, according to Nielsen SoundScan.

Who's to blame?

Everybody knows where the music industry has placed the blame: file-sharing services that allow consumers to swap songs for free over the Internet.

The industry has had some success going after service providers such as Napster, which it successfully shut down before Napster was revived as a paid service. Last September, however, the industry began to target individual users.

The Recording Industry Association of America, the industry's main lobbying group, has filed more than 3,400 lawsuits against indviduals who allegedly downloaded music from the Internet for free. To date roughly 600 them have settled, with the target agreeing to stop downloading music illegally and paying an average of $3,000.

It's no surprise, then, that an RIAA spokesman suggested that the litigation -- and the general awareness about illegal downloads -- is helping to drive the recent boost in CD sales.

But music industry analysts disagreed.

CD sales dropped in recent years, they said, because the economy slumped, leaving music to compete with video games, DVDs and other forms of entertainment for consumer dollars. They noted, too, the dearth of fresh talent as the teen pop fad began to wane around 2000.

Mayfield said a similar situation arose in the early 1980s after the red-hot Disco craze fizzled without any new genre emerging. Then, as now, there was much hand-wringing over consumers getting music for free -- via blank cassettes, not computers.

Music for the masses once more

Today, sales are growing because the economy and the job market are strong, CD prices have dropped, and the industry has once again re-connected with consumers. Hot sellers include country, Latin and classical music.

But analysts said there's another, seemingly paradoxical, explanation for the recent sales increase: digital downloads, the music industry's sworn enemy.

"The greatest effect of the appeal of Apple Computer's iTunes story and, to a lesser extent, other digital music services, has been to spur increased CD sales," said Aram Sinnreich, an independent music industry analyst. "They have managed to get consumers interested in music in a way they haven't been for years."

The ability to download a song for 99 cents means you can sample various artists before shelling out $17.99 for their album, analysts said.

"The Internet is also a helpful promotional vehicle for selling physical albums," explained Billboard's Mayfield. "It reinforces for people that (an artist) has something new to sell."

The 'great jukebox in the sky'

Yet, Sinnreich, the independent analyst, thinks the long-term prognosis for both CDs and single digital downloads is grim. That's because neither medium completely satisfies consumers.

"We're in the midst of a massive migration, where music will one day be a utililty like electricity or like water," he said. "You pay a flat fee on a monthly or a yearly basis and you can listen to whatever you want, whenever you want."

YOUR E-MAIL ALERTS
Arts, Culture and Entertainment
Music
Music file swapping
Internet

But the industry still has a long way to go before it creates what Sinnreich calls the "great jukebox in the sky." Until then, sales of CDs will likely ebb and flow.

Already, there are signs that digital downloads have leveled off. While 54 million songs were downloaded in the first six months of this year, according to Nielsen SoundScan, the average weekly rate has remained at about 2 million a week for awhile now, noted Mayfield.

"The early adopters are in," Mayfield said. "We'll have to wait to see what it takes to make (digital downloads) a broader mass-market phenomenon."  Top of page




  More on TECHNOLOGY
Honda teams up with GM on self-driving cars
The internet industry is suing California over its net neutrality law
Bumble to expand to India with the help of actress Priyanka Chopra
  TODAY'S TOP STORIES
7 things to know before the bell
SoftBank and Toyota want driverless cars to change the world
Aston Martin falls 5% in its London IPO




graphic graphic

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.