CD sales, the digital biz and more.

Struggling CD sales, a growing digital business and the industry's ongoing piracy fight dominated talk at day two of the National Assn. of Recording Merchandisers (NARM) convention in San Diego.

In his opening remarks on Friday, NARM president Jim Donio said that the stark reversal of fortunes for the CD business in the last 12 months were a "justifiable cause for concern," noting that at this time last year sales were up 9% over 2003, while in 2005, mid year sales are trailing by 7%.

Another growing problem flagged by Donio: the softening DVD business. "The DVD sales trajectory is slowing fast as the format reaches maturity, which is also troubling," he said. Stressing the need for new solutions, Donio reiterated NARM's support for copy management technology and for the emerging DualDisc configuration.

He also called for a revamping of copyright law for compulsory mechanical licenses to allow for easy licensing of music for a variety of new digital delivery opportunities. "The extraordinarily burdensome licensing process to secure content is presenting a very frustrating and needless obstacle," Donio said. "The publishing performance rights and songwriting groups are open to broadening the scope only to subscription service which NARM and RIAA both feel is unacceptable."

NARM chairman Richard Willis of Baker & Taylor called for increased cooperation and sharing of resources among labels, retailers and artists to help address the industry's sales woes. "As I look out over the next couple of years... it's going to be some fairly difficult times," he said. "There is not one easy solution that is going to be out there for us. It is going to be a bunch of solutions that we put into how we rebuild the business."

Meanwhile in the day's keynote address, RIAA chairman Mitch Bainwol said that the industry is making strides in its battle against P2P, but CD ripping and burning remain a growing problem for the industry.

According to a recent study by research group NPD, 29% of all music is acquired through ripping and burning. By contrast 16% of all music is obtained through P2P, NPD says. "We have no objection to personal use burning but this goes way beyond that," Bainwol said.

In regards to P2P, Bainwol said that the trade group feels it has the public support to both ramp up the number of lawsuits its filed against P2P users and drop the threshold of how many files a P2P user shares before that user is subject to RIAA litigation. Bainwol said that it has no plans at the moment to change its approach, it has the flexibility to do so if it wishes.

In the wake of the Grokster ruling by the Supreme Court, Bainwol said that the industry needs to seize the moment in the "message war" on piracy by moving the debate to "the core questions of property and right versus wrong," while at the same time pushing new products and services to consumers.

In other NARM news:

The confab next year will return to the Orlando, Florida area, running Aug. 2-5 at the Gaylord Palms resort. The convention will shift back to spring in 2007 running April 29-May 2 in Chicago at the Chicago Hilton.

Artist showcases of the morning session were Columbia's Delta Goodrem and Welk Music's Nickel Creek.

In the afternoon, Sony BMG Norte's Latin music product presentation highlighted upcoming releases from the likes of Ricardo Arjona, Alejandro Fernandez, Sin Bandera and Vicente Fernandez, as well as compilations "NOW Latino" featuring Marc Anthony and Shakira among others - and "Raggeton Platinum Hits." La 5a Estacion and Reik provided featured performances.

In other NARM news:

Omaha, Neb.-based indie American Gramaphone looks to be close to inking a new U.S. distribution deal with Fontana, the indie distribution arm of the Universal Music Group. The label is the home of new-age classical act Mannheim Steamroller, and has been selling direct and to various distributors and one-steps in recent history. While American Gramaphone's name appears on a Fontana poster hanging in the hotel, sources on both sides stressed lawyers were still sorting out the details of the deal, which they had hoped would have been completed by the start of the convention.

* Additional reporting by Todd Martens in San Diego.