Q1 2006 net shipments dipped by 18%.

Latin music, the most robust segment of the music market for two years running, has stumbled in the first quarter, according to RIAA numbers obtained by Billboard. Perhaps the most surprising trend the numbers reveal is the downturn in the subgenre that has garnered the most attention in the past year—reggaeton.

Net shipments of Latin music for the first quarter of 2006 dipped by an alarming 18%, compared to the same time period the year before. In total, Latin shipments, after returns, numbered 12.9 million units from Jan. to March, 2006, down from 15.8 million units for the same time period in 2005.

The decline in numbers corresponds to a decline in gross shipments, but more so, to a 48% increase in returns. The total returns for the time period in 2006 was 4.3 million units, while for 2005, it was 2.9 million units.

Not even reggaetón could stop the slide. The subgenre falls under the RIAA’s newly created Latin “urban” classification, formed, in part, in response to the increasing number of reggaeton product. But net shipments of Latin urban music, which also includes Latin hip hop and rap, were only 872,000 units for the first three months of 2006, after returns, which totaled a high 42%.

All told, Latin urban music accounted for only 6.7% of all shipments for the first three months of the year, falling behind even Latin tropical music, the perennial last place holder since the RIAA began tracking Latin music by subgenres.

In contrast, regional Mexican still accounts for the vast majority of shipments—57.7% in all. Although returns of the subgenre were also up, however, from 14% for this first quarter of 2005, to 23% for 2006.

Several executives have, for some time now, commented privately on the possible downturn of reggaetón, even as they have continued to sign new acts, and with key releases still performing high on the Billboard charts.

Still, says one retailer, “my biggest returns for the end of 2005 were reggaetón compilations. And if you look at the books, there are many more ahead of us. But I only have 10 reggaetón acts that really sell.”

High returns are also being attributed to high gasoline prices and more conservative spending from immigrants leery about their future.

The RIAA declined to comment.