Sales of U.S. Music Albums
Spin Slightly Faster
By ETHAN SMITH
Staff Reporter of THE WALL STREET JOURNAL
December 31, 2004; Page A8
Sounding a mildly positive note for the record industry, sales of U.S. music albums appear poised to rise this year for the first annual gain in four years.
The margin, however, is likely to be so slim that the music industry won't be to able declare a definitive victory against the many forces that have long bedeviled it, including piracy, a long creative drought and competing entertainment media.
Sales of albums through the week ended Sunday reached 665.5 million units, according to Nielsen SoundScan, up 1.4% from the same point in 2003. The industry has one more week of sales left before getting a final tally for the year.
Any sales increase is important, but the final number still will represent a disappointing slide from the 7% to 8% gains that the industry saw through the first nine months of the year.
Fourth Quarter Weakens
For every week of the fourth quarter -- by far the heaviest music-buying season of the year -- album sales have been down compared with the comparable week in 2003.
As a result, the margin for the year has been slipping as much as 0.5 percentage point a week. People in the music industry have been divided over the reason for the slide, but most agree that a weak slate of releases has failed to produce many albums with long-term buzz.
One of the few exceptions to that rule was R&B singer Usher, whose "Confessions" ended the year steaming toward sales of eight million units, and was poised to become the top-selling album of the year. Other top sellers are likely to include Norah Jones's "Feels Like Home," Eminem's "Encore" and Tim McGraw's "Live Like You Were Dying."
Sales of digital downloads grew at a torrid pace during the year, fueled by a surge in popularity of portable devices such as Apple Computer Inc.'s iPod, which are often sold with gift cards good toward $20 in downloads.
For the week ended Sunday, download sales of individual songs exceeded five million, according to Nielsen SoundScan, easily beating the previous record, set two weeks earlier, of nearly four million. Digital track sales are likely to exceed 131 million for the year, compared with 19.2 million in 2003.
Despite the high rate of growth in digital track sales, however, it will be a matter of years before they begin to represent a significant percentage of overall music sales, say people in the industry. In the meantime, global music companies are looking for other ways to make money, such as licensing their catalogs for uses including cellphone ring tones.
Similarly, retailers are looking beyond the compact disc. Mass merchandisers like Wal-Mart Stores Inc. and Target Corp. have long emphasized DVDs over CDs, and now even specialty-music retailers say they are doing the same, to their benefit.
Switching to DVDs
Mike Dreese, chief executive of the Boston area's 25-store Newbury Comics Inc. chain, says that DVD sales have skyrocketed, even as December music sales slid 5% from a year earlier. As a result, Mr. Dreese said his sales for the month were up 15%.
Although Newbury describes itself as a music specialist, Mr. Dreese said the chain's flagship store now stocks many more DVD titles than CDs. He predicted that by a year from now, DVDs -- which already make up 27% of the chain's sales -- will represent a greater percentage of his business than CDs, which are currently 41% of sales.
With a booming business developing in DVD sets of television series, Mr. Dreese says for agile retailers able to focus on the video discs, the current environment "is like the third or fourth year of the CD era," when consumers looking to replace old vinyl collections fueled a boom in music sales.
Music companies have tried to capitalize on the DVD boom, although for the moment, they can't keep pace with movie and television-program sales. Not one of the top 40-selling DVD titles, according to Nielsen VideoScan, is a music title.
