Digital music downloads set record but fail to make up for decline in CD sales

December 31, 2008 | 4:29 pm

Digital music downloads reached a milestone in 2008, exceeding a billion songs purchased online, according to a newly released report from Nielsen SoundScan, which tracks music sales. That represents a 27% gain over a year ago.

But the soaring popularity of the 99-cent download is not enough to offset continued declines in CD sales, which still account for the bulk of the music industry's revenue. Physical disc sales fell nearly 20% to 362.6 million, the seventh decline in eight years, according to SoundScan.

Overall album sales -- including CDs and the digital equivalent -- dropped 8.5% compared with 2007. Every musical genre, from alternative rock to Christian and gospel to new age to rap, reported across the board declines in album sales. Holiday sales -- hello recession -- were off by a steep 19%.

In an effort to cope with changing technology and the threat of Internet piracy, the recorded music industry has been exploring new sources of revenue. Royalties from satellite and Internet radio and so-called 360 deals with artists, in which the label shares in concert ticket and merchandise sales, contribute to the labels' bottom line. Video games such as "Rock Band" and "Guitar Hero" also generate licensing fees.

Nielsen doesn't track those alternative revenue streams

Universal Music Group remained the industry's big dog, with a nearly 32% share of the album market, followed by Sony BMG Music Entertainment at 25%. Warner Music Group claimed 21% of sales, and the smallest of the major labels, EMI Music, saw its market share drop slightly to 9%.

Lil Wayne's "Tha Carter III" was the bestselling album of the year, and country crossover artist Taylor Swift was the top solo artist. The '70s heavy-metal rock group AC/DC -- a group that long labored in the shadow of such contemporaries as Led Zeppelin -- was the bestselling group.

--Dawn C. Chmielewski

AC/DC lead singer Brian Johnson performs on the "Black Ice" tour at Madison Square Garden in New York. (AP Photo/Jeff Zelevansky)