There is growing anxiety in the recording industry about the future of its fundamental product, the CD, which is threatened with the same obsolescence that it long ago foisted on the LP and then the tape cassette.
Introduced in the US 20 years ago, the CD is losing its allure. From 2001 to 2002, some 62.5 million fewer of them were sold -- a decline of 9 percent to 649.5 million, according to Nielsen SoundScan. Online swapping of songs is growing at a crippling rate, forcing almost every corner of the music industry to try to divine exactly what role, if any, the CD will play in a future dominated by Internet delivery and competition from popular new technologies like the DVD.
Most analysts and industry executives agree that selling music online is the future. But they say it will take at least two years for companies to devise a business plan for it that makes financial sense. In the meantime, the CD will remain the biggest source of revenue for both music retailers and recording companies, who will try to squeeze as much profit as they can out of each and every sale.
As a result, the CD is being rethought, repackaged and, in some cases, repriced.
Experiments to resuscitate this ailing product are growing. In January, Bon Jovi created a compact disc, with eight previously unreleased songs, exclusively for Target stores. Priced at US$6.99, it was intended to help bolster sales of other Bon Jovi albums, including the newest, "Bounce."
Best Buy, the No. 1 electronics chain in the country, is selling prepaid cards good for 10 downloads that allow consumers to create compilations to play either on discs or on computers. And last year, the Interscope recording label gave a DVD to the first million buyers of "The Eminem Show" as an incentive to buy the CD.
All this is happening as the economic underpinnings of the CD continue to deteriorate, endangering the music business altogether. With the rising popularity of online music, much of it available free, technology-wise teenagers -- the industry's most voracious buyers -- can easily use CD-burning technology to make bootleg copies and sell them at school for as little as US$1.
Companies are showing signs of cracking. Two industry veterans have recently lost their jobs: Thomas D. Mottola, the head of Sony Music Entertainment, which lost more than US$132 million last year; and Jay Boberg, president of MCA Records. The music retailer Wherehouse Entertainment announced in January that it was filing for bankruptcy protection, partly because of lackluster sales. And the EMI Group, based in London, the only major music company that is not a part of a media conglomerate, is struggling with debt and is believed by analysts to be considering merger prospects.
"Large companies tend to wait until they feel pain to act," said Dan Hart, chief executive of Echo, a recently formed consortium of retailers that hope to sell music online. "Now they feel pain."
Doug Morris, chief executive of the Universal Music Group, said: "We are definitely in the middle of a transition. It was always a packaged-goods business, but that is changing. We are slowly moving forward."
Compact disc sales have slipped for several reasons, not all of them related to piracy or online music swapping. Critics complain that there is a dearth of blockbuster acts these days and that those with hits, like Britney Spears, often have short-lived careers. And with the average price of a compact disc at US$14.21, they contend that music is simply too expensive for frequent purchases.
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