As I noted yesterday, track equivalent albums are down 10.4% this year. Total album sales are down 17% this year. When people say that increases in digital sales are not making up for falling CD sales, the drop in track equivalent album sales shows the amount of the shortfall. There may be more music-related retail transactions -- because of a la carte downloading -- but their dollar value is dropping.

(Track equivalent albums are a statistic used by Nielsen to measure the shift from albums to digital tracks. Ten digital tracks are counted as one track-equivalent album, which are then added to actual album sales. A cynic could say this is a way to put a positive spin on an ugly story, but I think it's a good, simple tool to compare music transactions on a year-to-year basis.)

With track equivalent album sales are down as much as 10%, and already far worse than last year, we can expect more staff cuts, more executive-level turnover and more strategic transformations. Labels have mostly been reactive to the sales slump. Had they been proactive, more of these changes would have already taken place.

A 10.4% drop in track equivalent albums is steep, but what immediately came to mind was EMI's recently announced 15.8% drop in revenues for fiscal 2006. In 2006, track equivalent albums dropped only 1.2%, yet EMI's revenues dropped by 15.8%. Since I'm offering U.S. track equivalent album numbers, a better comparison would be EMI's North American recorded music revenues. In 2006, EMI's North American revenues dropped 7.7%. (Take out EMI's ringtone revenues and the drop is even worse.)

As a rule of thumb, a music group should be in good shape if it can achieve even track equivalent album sales. In past years, a shortfall would have been made up by ringtone sales. Those are flattening out, though, so increases in ringtones can't expect to make up for the shortfall. It will take some time for other budding revenue streams -- subscription services, ad revenue sharing -- to account for much.