Digital music sales to outpace CD sales

My local paper reports “sales of physical music media (CD) are expected to fall 8 percent to 10 percent this year, while sales of digital music could climb 150 percent to 200 percent. Digital music downloads will not destroy CD sales overnight but something is clearly changing in the music industry. In the third quarter, Apple’s iTunes Music Store made it the seventh-largest music retailer (according to NPD)”. The NPD Group (sales & marketing firm), founded in 1967, provides global consumer and retail information that helps manufacturers and retailers make more informed, fact-based decisions in order to optimize their businesses.

Based on this article, it implies many new customers are moving "more toward" digital music and not CD music. Revenue record labels are also losing as CD sales decline. If one looks ahead 5 years, what happens to CD music? Will digital music improve so much that it will sound better than CD music? Are there plans in the works to make digital music sound better than CD music? Do you have any comments?
Digital downloads are mostly singles. If you count 10 singles as an album, then in 2004 CDs outsold downloads 40:1. That's going to change, but not as quickly as your paper suggests. Download sales cannot continue to triple each year indefinitely. Sooner or later, everybody will own an iPod, and everybody's iPod will be full.

Overall, digital downloads will probably NOT improve quality-wise, because that's not what the market wants. What the market wants is small and convenient. That's too bad, because just going from 128 kbps (the current standard for downloads) to 192 kbps would take you most of the way to CD quality, and still leave room for many, many tracks on a full-size iPod.

You might see the emergence of "audiophile" download sites, which offer higher resolution downloads--at higher resolution prices, of course. But if they happen, they will be even less significant in the mareketplace than audiophile labels are today.
You might see the emergence of "audiophile" download sites, which offer higher resolution downloads--at higher resolution prices, of course. But if they happen, they will be even less significant in the mareketplace than audiophile labels are today

Pabelson, I'm not so sure this prediction is correct, realistic as it may appear. I am told (in UHF mag) that Apple is looking for more bandwidth so as to be able to supply music in its lossless compressed format. Also, I think any price differential between lossy and lossless downloads is not likely to be so great that it turns away most music buyers.

If download sites really want to take the CD's business, all they need is the ability to sell lossless-format music files. My guess is that's where we're going.

As a side note, that would mean the market for CD-only transports will dry up entirely, but makers of outboard DACs with USB inputs will see a sales upswing.
Tobias, I think you're totally right... Hey, I'll give you $100 for that old, obsolete Teac transport you have there...
You're a truly generous man Plato, but since these CD-only units are going to get scarcer and scarcer, I believe my T1 will have collectible status shortly :o)
I am using a single disk denon 1520, circa 1987, playing through a reflection audio modded benchmark dac1 and the sound is just plain exquisite. a wonderul old piece of equipment-- rapidly gaining antique status. i am presently moving towards a second, hd, system usting itunes, with an outboard usb dac. change change change. gotta keep the old and the new.
About Apple, I hope it's true, but I'll believe it when I see it. At some point, bandwidth may be fast enough and cheap enough that it doesn't matter how big download files are, but we are very far away from that point right now. Apple Lossless would require 5-6 times the bandwidth. To replace half of all CD sales would take a 20-fold increase in downloads. So you're talking about needing more than 100 times the current bandwidth, simply to replace half of all CD sales with CD-quality downloads. It'll come, but don't hold your breath.

Besides, what Apple really needs bandwidth for is video. If they had more bandwidth right now, which do you think they would do with it: make their music files larger, or offer more and longer video content?
My guess (as I haven't seen the articles mentioned) is that the growth of downloaded music is generated primarily by a small segment of the population, i.e. those 25 and under. The biggest obstacle to those in the music download business, will be to find a way to sell that method of music buying to all demographics. For example, my 70 yr. old parents, will buy a CD, but they're not going to download anything. When that "25 and under group" becomes the "50 and under group", the download business will be sitting pretty. But until that occurs, I think a strong market will remain for over-the-counter music sales.
Cruz: The people who are downloading music lean young. But the people who are *paying* for downloads do not lean quite so young. Still, I agree with you that this is a generational thing. Eventually, all the people who need a shiny disk in their grubby little hands will be dead.