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The music industry's up and down year

Rascal_flatts The numbers from Nielsen SoundScan are in, and for the first time, the number of downloadable albums sold (32.6 million) more than offset the decline in physical CD sales (-30.7 million). The overall picture wasn't particularly good; by SoundScan's calculation, the total number of albums and album-equivalents sold shrunk by 1.2%, even though the number of units sold (albums and individual tracks) rose 19.4% to a record 1.2 billion. In other words, the amount of revenue generated by album and track sales probably dropped. But we seemed to have reached the point now where digital sales have grown enough to fill the void left by slumping plastic-disc sales. And if the growth continues at anything close to the current rate -- downloadable albums doubled to 32.6 million, and downloadable tracks increased 65% to 582 million -- total sales of albums and songs in the U.S. might actually (gasp) grow. That suggests the transition from plastic discs to digital files will produce the same result as all the previous format changes: it will spur demand and lead to higher sales. Of course, getting to that point hasn't been fun for just about anyone.

A few notes from the data: Sales peaked the last two weeks of 2005, with that period accounting for a little less than 8% of all units sold. That's just a reminder of how seasonal the business is. During those weeks, the share of sales that were digital downloads jumped to about 67%, up from the yearly average of about 50%. That's not including the sales of gift cards and certificates from online retailers, such as the iTunes Store. Also, the sale of new CDs was about equal to the sale of releases from past years, which is about the same as in 2005. But the oldest titles -- a segment called "Deep Catalog" -- did better than more recent titles. Deep Catalog sales dropped about 3% from 2005, vs. an 8% drop for Catalog and a 9% drop for current releases. Meanwhile, downloadable Deep Catalog and Catalog titles outsold downloadable current albums by a wide margin, although sales in all three categories all grew at about the same rate -- they all doubled.

Pictured is the latest CD from Rascal Flatts, the top-selling artist last year in two categories: album and digital track sales. Hey, country fans are early adopters!

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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