Although overall music sales in 2006 fell, unit sales told a little more complex story. Sales of physical formats dropped, while unit sales of digital music skyrocketed over the previous year, while older music sold quite well and new music stumbled. Data from the first three months of this year follow this trend, with CD sales off 20%, would-be blockbusters not selling as well as they have in the past, and retailers like Tower Records just giving up. The WSJ article is hung on the idea that digital sales (in revenue terms) haven't grown enough to offset the decline in CD sales. Certainly, they haven't, but this isn't exactly the proper comparison to make. Switching to digital and online distribution isn't a format change, like the switch from cassettes to CDs -- it's allowed for a whole new way of selling music. Not just the ability for people to buy only the songs they like, but also the ability to easily search huge inventories of music from their computer, which is likely behind the rise in sales of older music. This comes as retailers like Best Buy and Wal-Mart, which dominate CD sales, are reducing the space they devote to CDs, making it even harder for consumers to find older music in their stores. The problem isn't that piracy and file-sharing are destroying sales; in fact, there's plenty of evidence to the contrary. The problem is that the record labels haven't shifted their business models to accommodate the new environment, and remain committed to the old, physical-format-driven model. While they may not be changing, there are signs that other folks in the music business are. The article quotes the manager of several well-known acts who says he now sees CDs as promotional material, that they're "the vehicle that drives the tour, the merchandise, building the brand, and that's it." Recognizing that music has promotional value, and not just direct pecuniary value, will allow the industry to open up all sorts of new business models to revive its flagging fortunes.
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