January 4, 2008 / 12:18 AM / 10 years ago

Album sales plunge in '07 as digital growth slows

LOS ANGELES (Reuters) - If only Christmas came a few times a year for the fast-fading U.S. music industry.

<p>A woman and her daughter who are tourists shop for music CDs at a Virgin Megastore in Times Square in New York in this file photo from Nov. 21, 2007. REUTERS/Jacob Silberberg</p>

Total album sales plunged 15 percent in 2007, and retailers waited until October for the year’s top release, California tenor Josh Groban’s holiday-themed “Noel,” according to sales data issued on Thursday by industry tracker Nielsen SoundScan.

Sales of physical and digital albums tumbled to 500.5 million units, as the music industry was pillaged by piracy and competition from other forms of entertainment like videogames, industry experts said.

It marked the lowest tally and the steepest decline since Nielsen began publishing estimates based on point-of-sales data in 1993, a spokeswoman said. The peak year in that time was 2000, when sales reached 785 million units.

Album sales on the Web rose 2.4 percent to 30.1 million units, but that was down from a 19 percent jump in 2006.

Overall sales -- including albums, singles, and digital tracks -- rose 14 percent to 1.4 billion units, also down from a 19 percent rise in 2006. The main driver of growth was a 45 percent jump in digital track sales to 844.2 million units. But even then, the pace slackened from 65 percent in 2006.

Things are likely to get worse for the next four or five years, said music attorney Kenneth Kraus, a Nashville-based partner in Loeb & Loeb, whose clients include Kid Rock and Carrie Underwood.

He said the music industry wasted too much time and goodwill battling digital distribution of music, and “we’ve lost a whole generation of kids” who grew up downloading free music from the Web and cannot fathom paying for it.

<p>A woman and her daughter who are tourists shop for music CDs at a Virgin Megastore in Times Square in New York in this file photo from Nov. 21, 2007. REUTERS/Jacob Silberberg</p>

“Maybe it’s going to be another five years” before the music industry comes up with a viable pricing plan that allows fans to download songs with no copying restrictions, he said.

THE LAST NOEL?

<p>A woman and her daughter who are tourists shop for music CDs at a Virgin Megastore in Times Square in New York in this file photo from Nov. 21, 2007. REUTERS/Jacob Silberberg</p>

Groban, who records for Warner Music Group Corp, sold 3.7 million copies of “Noel” and topped the U.S. charts for five weeks. The No. 2 album of 2007 was Walt Disney Co’s soundtrack to the Disney Channel TV movie “High School Musical 2,” with 3.0 million units. Its predecessor was the biggest release of 2006 with 3.7 million units.

As an indicator of how far the business has fallen, Mariah Carey topped the 2005 list, selling almost 5 million units of “The Emancipation of Mimi.” The top album of 2004, R&B singer Usher’s “Confessions,” sold nearly 8 million copies that year.

Universal Music Group, a unit of France’s Vivendi Universal SA, was the top distributor with 31.9 percent of total album sales, up from 31.6 percent in 2006.

Sony BMG Music Entertainment, a joint venture between Sony Corp and Bertelsmann AG, was second in market share with 25 percent, down from 27.4 percent in 2006. Warner Music Group Corp was No. 3 with 20.3 percent of the market, up from 2006 when it had 18.1 percent.

London-based EMI Group Plc., which was acquired by buyout firm Terra Firma Capital, was last among the “big four” major labels with a 9.4 percent market share, down from 10.20 percent in 2006. The label’s new owners have warned artists they could be dropped if they do not work hard enough for their money.

The United States is the world’s top music market, accounting for about one-third of sales, according to the International Federation of the Phonographic Industry (IFPI), a London-based group that represents the major record labels.

Reporting by Dean Goodman; Editing by Bob Tourtellotte

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