Music Business Still Groping for a Digital-Age Plan Midyear music sales figures are in. Not surprisingly, they're not good: CD sales are down from last year, and legitimate online sales are far outstripped by downloads for free. How will the industry cope in this new generation of digital media consumers?

Music Business Still Groping for a Digital-Age Plan

Music Business Still Groping for a Digital-Age Plan

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R&B artist Ne-Yo bucked industry trends this year with a No. 1 album that sold half a million copies. Def Jam Recordings hide caption

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Def Jam Recordings

R&B artist Ne-Yo bucked industry trends this year with a No. 1 album that sold half a million copies.

Def Jam Recordings

Eric Garland is the head of BigChampagne, a marketing research service for online media. hide caption

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Michael Bracy is the policy director for the Future of Music Coalition. hide caption

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R&B singer Ne-Yo, by most measures, is having a very good year. His latest CD hit No. 1, and has sold more than half a million copies since it came out in May. And Ne-Yo has sold more than two million individual tracks online.

Not that he's bragging.

"I don't look at this like, 'Let me try and sell as many albums as I possibly,'" says Ne-Yo, aka Shaffer Chimere Smith. "I mean, that's what everyone wants you to do, that's what everybody prays for. But at the same time, that's not what you're thinking about when you're making the music. ... You're just thinking about trying to create a piece of art, something that will outlive you and your kids, and your kids' kids."

Goal or not, Ne-Yo's sales numbers are especially impressive in today's music-industry landscape. According to midyear record-sales figures, many of his fellow artists aren't doing nearly as well.

Nielsen SoundScan data shows that CD sales for this year have fallen 19 percent compared with the same period last year. That's after a roughly 7 percent drop from all of last year. And while more people are legitimately buying music online, 10 times as many songs are still downloaded for free.

According to Michael Bracy, policy director of an indie-artist advocacy group called the Future of Music Coalition, the basic, age-old question about attracting attention to performers remains the same. But there's a newer problem, too: "How do you 'monetize' the digital-music industry?" he asks.

Not that CDs and other physical products are going away just yet. Mitch Bainwohl, head of the Recording Industry Association of America, says neither the industry nor consumers are willing to toss out their shiny plastic discs.

"There's an appetite for physical product there," Bainwohl says. "There's still something, when you can touch and feel and read and own, that's still of value to people. But they'll be looking for products different from the traditional CD, and we'll see over the course of the next six months a range of these products come out."

The newest big innovation is called the Music Video Interactive disc, loaded with extras like downloadable MP3s. But according to some, the MVI and other physical products represent an attachment to an obsolete sales model.

In part, it's a generational divide. Bracy, from the Future of Music Coalition, says there's now an entire generation of listeners who grew up fully digital. And sales of digital songs have risen 49 percent.

But according to Eric Garland, who runs a Web site called Big Champagne that tracks music online, digital hits tend to be purchased by older listeners, either for themselves or for their kids and grandkids — so the top sellers in a given year might be standards by Rod Stewart, or songs from Disney's High School Musical.

Younger consumers who want to hear Ne-Yo's latest hit, meanwhile, can just visit his MySpace page and hear it streamed for free.

"More and more what we hear from young people is, 'I really have no need to buy that song from iTunes, or really I can't even be bothered to steal it, because I've listened to it on MySpace now a thousand times and if I ever hear it again it will be too soon," Garland says.

Young people increasingly discover new songs and artists by reading music blogs and listening to Web radio. But Bracy warns that the fate of the music industry — in particular, the future of independent artists — hinges on the unencumbered availability of music online — specifically, the issue of network neutrality.

Net neutrality is the idea that Internet providers must treat all content equally. It's the subject of pending legislation, and it's opposed by cable and telecom companies that want to offer different tiers of service — and prioritize their premium customers' content. (See a primer.)

If Net neutrality goes the way of the LP, Bracy says, it would be a tough, new atmosphere for independent musicians.

"It is absolutely vital for the future of the music community that we don't allow these two industries to basically lock down the Internet in the same way that Clear Channel and several other large corporations locked down commercial radio," Bracy says.

Bracy is referring to the change heard on the airwaves after the Telecommunications Act of 1996 allowed Clear Channel and other big broadcasters to purchase thousands of radio stations nationwide. Recently, Clear Channel and three other broadcasters reached a payola settlement with the Federal Communication Commission; as a result, the four agreed to devote airtime to independent musicians.

Of those four, only CBS Radio has been willing to give NPR examples of actual programs featuring independent musicians. Among the initiatives they showcased are entire shows on local CBS stations featuring only local indie acts — that air when local audiences are actually listening.