CD Sales Up in 2004

Norah, Usher lead first sales increase in four years

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Record sales rose 6.9 percent in the first half of 2004 -- the first period of growth for the ailing business in four years. But even some top music executives are skeptical about the significance of the rising sales numbers, especially in a year of massive layoffs, budget cuts and record-store closings. "I remain cautiously optimistic," says Antonio "L.A." Reid, the chairman of Island Def Jam. "But I still believe that we're deeply in the woods, with a long way to go before we can see clearly."

Reid's explanation for the sales increase is simple: big records. Usher's Confessions (4.5 million sold in 2004's first half) and Norah Jones' Feels Like Home (3.1 million) have performed similarly to blockbusters by 'NSync, Britney Spears and Eminem a few years ago. "The stars line up and you sell records," says Reid. "Without those things, the industry would still be in the toilet."

From 2000 to 2003, CD sales plummeted 16.4 percent, from 785 million to 656 million -- so the increase from 286 million in 2003's first half to 306 million this year is hardly a dramatic recovery. Some music-industry experts even wonder if the new numbers are misleading; Universal, Warner Bros. and Sony have recently dropped prices on many releases, perhaps leading to some sales increases but a proportional decrease in revenue.

Still, many executives see reasons for optimism. Jordan Katz, executive vice president and general manager of BMG Distribution, says Usher's Confessions (on the BMG-owned Arista label) shows that quality CDs can remain in the Top Ten for months. He says that while Top Ten albums have been selling at the same level as a year ago, sales of releases ranked from 11 to 200 are up this year. "It appears we're heading into a really healthy cycle of great artists," Katz says. "Certainly the improvement of the economy has helped."

This hasn't improved the labels' bottom line -- so far. Earlier this year, the new Warner Music Group announced layoffs of 1,000 employees, and the EMI Group announced plans to lay off 1,500 people and cut twenty percent of its "niche and underperforming" artist roster.

Perhaps the most tangible effect of the sales uptick is that labels are able to put a positive spin on the layoffs and cutbacks. "Painful as this period has been, we're a better, smarter company for it," says Will Botwin, Columbia Records Group president, whose parent company, Sony Music, is working out a merger with BMG. "The best of the best are who are at the record companies right now. It's a leaner, more creative, fast-footed business overall."

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