Pause the MP3, kids: despite gains in digital sales, music sales in general are still suffering from a significant decline. It's a well-known fact that digital music has not replaced the loss of revenue from CDs, but according to information released from the International Federation of the Phonographic Industry (IFPI), even digital sales of recorded music are apparently bottoming out, growing at an increasingly slow rate.
Notice some of the nuances of chart above. While physical music sales in 2010 dropped by almost two billion dollars from 2009, digital music increased only about $0.2 billion. Keep this rate of decline up and CD sales will be nonexistant in less than six years, digital sales increasing by $1.2 billion to a puny total of $5.8 billion.
What is a record company do? For the labels, there may be some money to be found in various online subscription models like Rhapsody or Spotify, or by cracking down on online piracy, says Robert Andrews at Paid Content. Others like Ethan Kaplan, a former Senior VP at Warner Music Company, believe that the industry is still overbloated, refusing to give up on physical CDs completely and face up to what is no longer a new musical reality. As a "once major source of high margin revenue which is now taking disproportionate back line expense to prop up," he says, CDs are used "in order to justify the size of an industry which does not exist anymore." Kaplan is unsentimental, and believes the silver disc should be unceremoniously put to death.
In somewhat related news, while the labels are reeling, some older artists may not be: Eminem is currently at the center of a case that may stay closed if the Supreme Court's refusal to hear an appeal stands. The suit would grant some artists who signed contracts before the digital dawn a greater share of revenues from their songs that are sold electronically--what would be an increase from 12 to 50% of royalties in Em's case--due to a debate about whether digital music is technically a "sale" or a product that is "licensed."