Music sales turnaround continued

LOS ANGELES -- Online file-sharing and other digital piracy persist, but a gradual turnaround in U.S. music sales that began last fall picked up in the first quarter of this year, resulting in the industry's best domestic sales in years.

Overall U.S. music sales -- CDs, legal downloads, DVDs -- rose 9.1 percent in the first three months of the year over the same period in 2003, according to Nielsen SoundScan.

Album sales were up 9.2 percent. Sales of CDs, which represent 96 percent of album sales, rose 10.6 percent. For the first time since 2000, two recording artists -- Norah Jones and Usher -- managed to sell more than 1 million copies of their albums in a single week.

"We've had a big run so far," said Geoff Mayfield, director of charts and senior analyst for Billboard Magazine. "Because we've had three years of erosion, at least for the first eight months of the year, it will be relatively easy for the industry to post increases."

The sales data are a bolt of encouragement to an industry hit by a three-year sales slump it blames largely on file-sharing. The downturn prompted a wave of restructuring by record companies and thousands of layoffs.

Cary Sherman, president of the Recording Industry Association of America, called the first-quarter figures "good news," but cautioned that the results were measured against a dismal period.

"The numbers of 2003 were down about 10 percent to 12 percent from the year before," Sherman said. "If we didn't have that kind of increase it would be really terrible."

U.S. album sales declined annually in the three years following 2000, the biggest year since Nielsen SoundScan began tracking U.S. music sales.

In 2001, sales were down 3 percent. The next year, sales dropped 11 percent. Last year, until September, sales were down 8.5 percent, but the pickup in sales at the end of the year narrowed the total decline for 2003 to less than 4 percent.

The burgeoning online music market accounted for the sale of more than 25 million tracks between January and March, eclipsing the 19.2 million tracks purchased in the last six months of 2003, according to Nielsen SoundScan.

Stores also saw gains. Chain stores' music sales were up 7 percent, while independent music retailers saw a 3 percent increase. Discount chains such as Wal-Mart, Target and Kmart posted a 13 percent jump in sales compared to the same period last year, according to Nielsen SoundScan.

Industry observers said no single factor has driven the turnaround.

Mayfield sees similarities with the industry's slump 20 years ago.

Sales of disco music dried up after the dance scene fell out of vogue in the early 1980s. In the late 1990s, the Backstreet Boys, 'N Sync and Britney Spears drew millions of teenage fans who had been out of the music marketplace, but sales didn't keep up as the audience got older.

"That music was hot and nothing moved in to replace it," Mayfield said.

He also draws comparisons between the loss of eight-track sales in the early 1980s and the more recent phasing out of cassettes, a format that provided customers with a cheaper alternative to CDs.

The early 1980s and the early part of this decade were also marked by economic downturns. Conversely, the music industry was better able to weather the recession in the early 1990s because of CD sales driven by consumers replacing their vinyl record and cassette tape collections.

Still, the recording industry has focused on Internet piracy, and its trade group cites surveys that indicate the number of people engaging in file-sharing has declined since the group began suing computer users.

But other research shows millions continue to download music, movies and software over peer-to-peer networks.

A recent study by two professors at Harvard University and the University of North Carolina at Chapel Hill may suggest how the industry's sales could be improving amid file-sharing.

The study, conducted over 17 weeks in the fall of 2002, was based on data compiled in the user logs of two OpenNap servers that host traffic by U.S. users of file-sharing programs including WinMX.

The researchers plucked 680 songs on albums by artists like Eminem and compared how often their songs were downloaded on the network to their weekly sales figures. The authors concluded that file-sharing has a statistically insignificant impact on record sales.

The findings are disputed by other researchers whose studies, mostly based on consumer surveys and willing monitoring of computer users, have shown that music fans who download songs for free pay for music less often.