The year is over and the numbers are final. Excluding ringtones, the recorded music story was more of the same: CD sales fell and digital downloads grew. The album struggled against the attractiveness of a la carte downloads -- but it didn't crack. New releases sold poorly in 2006 while catalog titles fared much better. The CD, predicted to die years ago, was by far the dominant format.

Album sales were down 5% in 2006, falling to 588,153,000 from 618,951,000. Independent stores represented the biggest percentage change in sales, falling 18%. Mass merchant album sales were down only 4%.

Catalog titles fell only 2%, and deep catalog (albums three years or older) was even with 2005. New releases fell 7%.

In 2006, digital sales accounted for 5.5% of all album sales. The CD accounted for 94.1%. The remainder -- or just a fraction of a percent -- was split by cassettes, vinyl and DVD.

Digital Growth

In 2006, digital album sales increased 105.4% over 2005. That was not enough to offset the 8.2% decrease in CD sales. Total album sales dropped 4.98% in 2005, or 30.8 million units.

Sales of digital tracks improved 65% in 2006, to just under 582 million tracks.

Mile Markers

Album sales through the first 26 weeks of 2006: 270,615,000, down 4.2% year over year. An anticipated second-half rally never materialized. By the end of the year, album sales had dropped 4.98%.

Digital track sales through the first 26 weeks of 2006: 158,771,000, up 70% year over year. Growth slowed, though. By the end of the year, the annual growth rate had dipped to 65%.

The Digital Music Divide

How the digital album fared against the CD depended on the genre. Alternative music had a 90.9/8.8 CD-to-digital ratio. Electronic music was 88.9/10.3 -- the biggest digital share of any genre. Country music is slower to move to digital. Country had a 97.2/ 2.6 split. Rap is only slightly better for digital, with a 96/3.5 ratio. R&B is about the same at 96.2/3.7.

Conclusions

The health of the industry, which will be tied to the CD for many years to come, rests in the hands of mass merchants. Mass merchant CD sales dropped only 4% in 2006, far less than the overall 8.2% drop in CD sales. As labels trim their staffs, greater emphasis will be placed on fewer large accounts that require less manpower to service. If mass merchants raise the white flag and lose interest in the CD, labels will have no alternative to make up for the loss.

Fewer retailers equals lower sales. The loss of Tower will add to the CD's woes in 2007. Catalog titles will especially be hit.

Deep catalog sales were the same in 2006 as they were in 2005. New releases, on the other hand, dropped 7%. Although popular opinion says labels do not know how to properly monetize their catalogs, the numbers indicated labels are properly making use of their old recordings. Relative to new releases, catalog sales are healthy. Given the lack of depth at mass merchants, a growing and dominant segment, the steadiness of catalog sales is impressive.