US Music Industry Holding Steady

Is the music industry in the early stages of a turnaround? Sales of recorded music in the US declined by less than 1% in 2003, according to figures released December 31 by Nielsen SoundScan.

"Less than 1%" could be interpreted as "holding steady," given the music industry's prolonged decline in sales. The 0.8% drop in unit sales was an abrupt change after a three-year downward spiral. It's unclear, however, whether this is a long-term trend or a temporary phenomenon.

Total CD album sales in 2003 were down 2% compared to 2002, which in turn was off 8.7% compared to 2001. Countering this slight decline was a surge in demand for legitimate downloads that began with the launch of Apple Computer's iTunes Music Store in April. Other online music services also enjoyed a spike in business, partly a spillover effect from the popularity of the Apple service, and several new ones plan to go live early in 2004.

Some inconsistent but encouraging numbers emerged following the Nielsen report, which noted that 19.2 million individual audio tracks were downloaded from June 29 through December 30. Apple claims 25 million tracks have been downloaded from its service alone since it began. In 2003, 21.7 million albums were downloaded, an increase of 20% over the previous year, according to the Hollywood Reporter.

But hard goods still rule the market for recorded music. In 2003, CDs accounted for 96% of all music sold in the US, a total of 635.8 million units. Cassette tapes continued to lose ground, with sales down 39.8%. Singles declined 4%, but sales of DVD music videos soared, with a gain of 104.5% for the year. Record labels and music retailers alike apparently enjoyed a happy winter holiday season—music sales in the fourth quarter of 2003 rose 10.5% over the same period in 2002, with CD album sales up 5.6%. Reuters news service noted that sales of current albums were off by only 1.3% in 2003, a total of 423.9 million units, a development attributed in part to "aggressive loss-leader pricing by discount chains such as Wal-Mart Stores Inc. and Best Buy Co. Inc." Catalog sales (older titles) were down 7.5%, with a total of 232.3 million sold. Very old titles ("deep catalog," in industry parlance) sold 165.9 million units in 2003, with a drop of 6.2%.

The numbers are indicative of "an industry in recovery," Nielsen Music president Rob Sisco told Ethan Smith of the Wall Street Journal. The most popular album of the year, with 6.5 million sold, was Get Rich or Die Tryin' by rapper 50 Cent. Norah Jones wasn't far behind. Her Come Away With Me sold 5.1 million units. Linkin Park sold 3.4 million copies of Meteora. Evanescence did almost as well, selling 3.3 million copies of Fallen, and Outkast sold 3 million copies of Speakerboxxx/The Love Below. Other big sellers were Beyonce's Dangerously in Love with 2.5 million, R. Kelly's Chocolate Factory, and Hilary Duff's Metamorphosis, both with 2.4 million. Toby Keith's Shock'n Y'all sold 2.3 million and Coldplay's A Rush of Blood to the Head also did well, selling 2.1 million.

Among music genres, country and rap receded in popularity—despite Toby Keith's and 50 Cent's success—while alternative rock, jazz, and Latin music improved over sales posted in 2002. Universal Music Group (UMG) continued to dominate the recorded music business, with a 28% market share. Warner Music Group (WMG) was second with a 16.4% share. BMG was a close third with 15.5%. Sony Music held onto 13.7% of the market, a slip of about 2% from 2002. EMI moved in the opposite direction, increasing its stake from 8.4% the previous year to 9.7% in 2003. All other labels combined accounted for the remaining 16.7% of the music market. As previously reported, BMG and Sony Music have announced plans to merge their operations, pending regulatory approval.

US music executives expressed cautious optimism at the results. The global situation may be less encouraging. As of this report (January 5) the International Federation of Phonograph Industries (IFPI) had not released a year-end report for 2003. Analysis posted October 1 on the organization's website reported a worldwide decline of 10.9% in sales of recorded music for the first half of the year.