Apple Computer Inc. CEO Steve Jobs has seen his company's iPod digital music player, which starts at $250, sell more than 10 million units since 2001 -- and 8.2 million in 2004 alone. The iPod, no bigger than a pack of cigarettes, can hold up to 10,000 songs. Apple also recently released the iPod Shuffle, a less pricey (starting at $99) and less capacious version of the iPod; sales have been brisk. Pepsi is now giving away songs on the iTunes Music Store -- the online site where iPod users can plug in and download.
Record labels, which also profit when one of their artists is downloaded from services such as iTunes, are excited about "how steep [download numbers] continue to climb," Miller said.
Fernando Rock checks out an iPod Mini in Palo Alto, Calif. Apple sold 8.2 million iPod digital players last year.
(Paul Sakuma -- AP)
In other words: CD album sales are bright, but the downloadable digital future is blinding.
Apple also offers docking stations and various other gizmos that allow users to hook up their digital music players to home entertainment systems. That way, they can pump out their own carefully selected and precisely ordered song lists for all to hear.
Consumers are craving convenience and want to customize their music-listening experience, said John Simson, CEO of SoundExchange, the first performance-rights organization designated by the U.S. government to collect royalties on behalf of artists and labels.
"What we've been seeing is just going to continue to develop," Simson said, adding that the popularity of downloadable music will force musicians, labels and watchdog groups such as SoundExchange to make sure all the right people are getting paid. "You're going to see record companies become much more focused on licensing. There are already subscription services now where you can listen to whatever you want when you want it."
Indeed, Napster's To Go subscription service allows buyers to essentially rent an unlimited amount of music for $15 per month. A subscription-based service will be built into the latest version of Microsoft Windows; for between $10 and $20, users will access songs for a monthly fee but will be unable to burn them onto CDs. The only way they'll be able to listen to them is via a digital music player such as the iPod, or on a computer.
More than 30 percent of CD albums last year were bought online. So, for record stores to keep up with the times -- Tower Records filed for Chapter 11 bankruptcy protection last year, citing competition from the Internet and big-box stores -- Petersen said merchants have to modernize their approach.
"Everyone said the Internet is going to kill physical CD sales, but it's actually helping CD sales," Petersen said. "The Amazon experience is easier than going to a store. . . . Why aren't record stores using the Internet? If you keep things old-school, you are going to die."
In the "no format" future, Petersen added, record stores, in order to better serve consumers who might not have all the technology at home, should burn CDs for customers and offer high-resolution graphics for a jewel case.
Liner notes and album art will be downloadable, too. Still, the days of sprawling on the floor and gazing at an album cover are waning.
"As we move forward, if you've never had [album art], you don't miss it," Gallagher said. "Ultimately, what's important is the content."
"Once you've loaded 10,000 songs onto your iPod, album art is pretty much out the window anyway," Petersen said.
Those sighs you hear are all the people who remember getting lost in the bizarre beauty of Elton John's "Captain Fantastic" cover design. Or the "Sgt. Pepper" shot.
The good news for curmudgeonly souls unwilling to embrace a brave new world is that there will probably always be something "physical" to stuff in their purses, even if they have to make it themselves.
"I think there will always be a market for the physical product," said Steve Blatter, 38-year-old vice president of music programming for Sirius Satellite Radio, a company that intends to thrive on the consumer's desire to customize musical options. "If you just want to listen to music on your computer, think about what you have to go through to listen to that Ashlee Simpson song.
"There is a simplicity to the CD player."