Media research operation Enders Analysis predicts that global music sales will be $23 billion in 2009. The number sounds great until the industry looks back at its $45 billion in sales for 1997. The CD was king then, and the digital download business did not exist.
Enders posits that download services allow consumers to buy single songs instead of albums, cutting the income to companies like Warner Music Group (NYSE: WMG). The shares in that company have fallen from over $30 in July 2006 to their current price of $17.
Industry experts says that CD sales have already declined 20% in the first seven weeks of the year, so the forecast of a steeper drop seem plausible.
The other trend harming music sales is the ability of consumers to download music files illegally, an action made easier by broadband growth.
It is nearly inevitable that the music industry will have to make very significant cutbacks in staff and numbers of artists carried in catalogs. As the age of the CD becomes history, the future of music companies grows dim.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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