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Despite Drop in CD Sales, Music Industry Is Upbeat

By Frank Ahrens
Washington Post Staff Writer
Wednesday, April 18, 2007

The music industry experienced the greatest one-year loss in sales of compact discs last year, and rising revenue from songs and albums bought on the Internet failed to offset the consumer flight from CDs.

Revenue from CD sales was down 13 percent last year compared with 2005, the Recording Industry Association of America reported yesterday. The drop-off exceeds that of any year during the Napster era of 2001 to 2004, when the file-sharing service and its descendants -- such as Kazaa and Grokster -- allowed users to download music for free.

Meanwhile, online sales of singles from services such as Apple's iTunes were up 60 percent last year.

However, because online sales remain a small percentage of all music sales, the industry's total revenue -- for tangible and online products -- was down 6.2 percent compared with 2005, the RIAA reported. This month, Apple reported the sale of its 100 millionth iPod.

"Today's music marketplace has challenges, but it also offers reason for hope and optimism," RIAA chairman Mitch Bainwol said in a statement. "The appetite for music is as strong as ever. . . . Beyond the existing marketplace, the record companies continue to develop additional new business models and revenue streams like mobile and online videos."

The music industry has blamed piracy for the dive in CD sales and began suing downloaders and the file-sharing services in retaliation in 2003.

The campaign continues.

Last week, the RIAA sent "pre-litigation settlement letters" to 22 universities, including the University of Maryland system and the College of William & Mary, telling administrators that the RIAA is about to sue students for illegal downloading. The schools are asked to forward the letters to the students and tell them they have a chance to settle copyright violation claims against them before a lawsuit is filed.

In addition, the music industry continues to battle piracy in China and elsewhere in Asia -- where mobile CD-burning operations often keep perpetrators one step ahead of the authorities -- and online piracy in Russia, where a large online music store operates without paying licensing fees to the big music companies.

CD sales peaked in 2000, with the major labels shipping $13 billion worth of discs to stores. Sales dropped about 8 percent each following year, until a 2 percent uptick from 2003 to 2004. But the falloff resumed in 2005 and hit its lowest point in more than a decade last year, when music companies shipped $9.2 billion in CDs.

Last year, sales of albums bought on the Internet shot up 103 percent compared with 2005, the RIAA reported. However, revenue from all online sales -- singles, albums, files for mobile devices and so forth -- amounted to only 16 percent of total music sales last year.

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