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Sales of CDs are falling faster than you can say iPod

Last month, EMI Music Chairman and Chief Executive Alain Levy walked up to a podium at the London Business School and told an assemblage of bright-eyed young titans of tomorrow something that, in all likelihood, they already knew full well.

"The CD as it is right now is dead," he said. As usual, the big brass at the very pinnacle of the industry seemed the last to know. Levy's remark came towards the end of a year in which the 89-store national retail chain Tower Records went bankrupt and announced that all of its stores will soon shutter. Online giant iTunes cracked the top ten music retail outlets for the first time ever, and the only places CDs actually sold well were stores like Target, Best Buy and Wal-Mart.

And yet it remains too early to say that the CD is dead, as in buried in a casket underground. It's certainly terminally ill, condemned, a dead medium walking. Indeed, sales of CDs still dwarf digital sales, to the tune of $6.45 billion to $945 million worldwide. But CD sales are sliding, a little faster and steeper every year. People tend to buy less music as they grow older, and the CD audience is pretty much exclusively aged 30 and up. Very few teenagers buy CDs, and what's more, just about every music retailer will tell you that those who do will end up burning that CD for a few friends.

Sales of CDs are falling faster than you can say iPod
Daniel Kramer
Sales of CDs are falling faster than you can say iPod
Thomas Escalante: "CDs have gone from being a destination purchase to an impulse purchase."
Daniel Kramer
Thomas Escalante: "CDs have gone from being a destination purchase to an impulse purchase."

CD sales fell a further 4 percent from 2005's numbers in the first half of 2006, according to figures cited in the UK newspaper The Guardian. "We figure the value of CD sales will be 50 percent less in three years than it is now," said Ged Doherty, the UK head of the Sony BMG label group. "We predict digital growth of 25 percent per year, but it is not enough to replace the loss from falling CD sales. By 2010 we will be 30 percent behind in terms of revenues. We have to reinvent."

As Fats Domino once sang, "Ain't that a shame." But the record labels brought all this on themselves. Looking back over the past 45 years, it is now plain that the move from vinyl to CD was not the bold step forward we were told it would be. CDs were not scratch-proof (as the labels had us believe early on), nor was the sound an improvement on vinyl -- indeed, most audiophiles argue that their sound is inferior. Jewel cases were ridiculously brittle -- they were rendered useless by a drop of four feet or so -- and they were hard to open, as were the huge and idiotic long-boxes CDs were packaged in well into the 1990s. Their visual appeal was almost always minimal and yet they took up what now seems like a lot of shelf space.

In fact, CDs were really just another example of how the music business has been about profit, rather than music, for a long time. The move from vinyl to CD was a top-down decision imposed on music fans and retailers, who had to spend huge sums refitting their stores. The labels saw that they could both charge roughly double the money for new music and re-release their back catalog on the new format.

"At the time, the labels owned the CD technology," says Greg Ellis, an HP contributor and 30-plus-year veteran of the music business who currently works at local label Blue Corn. "They justified their high prices with that drug company logic -- that they needed more money for 'research and development' and stuff like that, which was bullshit after the first couple of mega-hit CDs. Downloading caused them to lose control of the technology, and so they fought it until Apple showed them a way to make money off of it. Not as much money, but it was either that or nothing."

"The record labels' main business model is to sell plastic," says Garrett Kamps, managing editor at Rhapsody Music Services in the San Francisco area and an occasional Houston Press contributor. "They manufacture and distribute plastic. Of course they have to put something on the plastic to make it more appealing -- but the music is secondary."

All of this turmoil at the top can be seen clearly at street level here in Houston. The SoundWaves chain has contracted from nine stores to seven, and in some of those that remain open -- notably the Montrose location -- the CD racks diminish astonishingly, replaced by coffee bars and shelves of surfing accessories. But nowhere is the steep falloff of CD sales more apparent than in the Shepherd Plaza area. That district was once something like the Flower Alley of music retail, home to CD-heavy stores such as Cactus, CD Warehouse, Wherehouse and Record Rack, not to mention vinyl-only or vinyl-heavy stores like Black Dog and Sound Exchange, blocks away at Richmond and Hazard. Cactus's closure this year capped a dramatic five-year free-fall. Today, only Black Dog and Sound Exchange, the niche-store/vinyl specialists, remain.

In five years or less, the CD really will be dead, another music delivery system chucked on the scrap-heap with the 78, the 8-track and the cassette.

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