Business Matters: Six Things in SoundScan's 2012 Mid-Year Report to Be Optimistic About
Business Matters: Six Things in SoundScan's 2012 Mid-Year Report to Be Optimistic About

It's beginning to look like the party begun in 2011 for the revival of U.S. album sales is over: In the first six months of 2012, album sales dropped 3.2% to 150.5 million units, according to Nielsen SoundScan (versus 155.5 million units in the corresponding period of 2011), due to a renewed acceleration in the decline of CD-album sales.

Adele, Gotye Lead Mid-Year SoundScan Charts

In 2011, album sales grew 1.4% to 330.6 million units -- the first annual album growth since 2004 -- thanks largely to CD sales declining more slowly than they had in previous years.

2011 U.S. Mid-Year Album Sales Up for First Time Since 2004, According to SoundScan Figures

This year, although digital album scans continued to enjoy robust growth -- jumping 13.8% to 57.2 million units in the first six months of 2012, from 50.3 million units the corresponding period last year -- that was not large enough to offset the decline in CD album sales. Also, the growth of digital track sales slowed down in the first half of this year -- growing 5.6% to 698 million, a big drop from the 10.6% increase in the first half of 2011, which saw scans climbing to 660.8 million from the 597.4 million units in the first six months of 2010.

In the second quarter of this year, the CD album again began to act like it did during 2006-2010, when the format saw annual sales declines in the 18%-20% range. For the second quarter of 2012, CDs sales declined 15.1% to 42.6 million units, as compared to the 51.4 million units scanned in the second quarter of 2011, when that tally represented a 0.8% increase over the second quarter of 2010 when scans totaled 50 million units.

Overall in the first half of 2012, the CD posted an 11.8% sales decline to 91.06 million units, versus the 101.3 million units scanned in the first half of 2011. That 11.8% decline is more than double the pace that the CD set for all of 2011, when its unit scans dropped 5.7%.

As a result of the accelerating CD decline and the somewhat slower digital-track growth, albums -- including track-equivalent albums (TEA), whereby 10 tracks equal one album units -- fell back into red for the first time in over a year, with scans in the first half totaling 220.3 million units, versus 221.5 million units in the first half of 2011, a decline of 0.6%.

However, overall unit sales for all configurations remain positive in the U.S. with 4% growth thanks to albums, digital tracks and singles reaching 850.2 million units, up from 817.7 million units in the first half of 2011.

Moreover, when looking at digital album sales plus track equivalent albums (TEA) combined, they totaled 129.2 million units, a 9.2% increase over the 118.3 million units digital plus TEA scanned in the first half of 2011. Currently, digital albums plus TEA comprise 58.7% of album sales, while physical albums total 41.3%. Looking at albums minus TEA, digital comprised 38% of album sales while physical formats combined equal 62% of scans.

Of course, the powerhouse album of the past 18 months has been Adele's "21," which has scanned a whopping 9.5 million U.S. units since its release in January of last year, and enjoyed a second wind in the wake of her big night at the Grammy Awards in February. "21" is the No. 1 selling album of 2012 so far, with 3.67 million units.

Adele's Grammy Performance Brings '21' Biggest Sales Gain In SoundScan History

Looking at digital songs, two titles have achieved the distinction of passing the 5 million unit mark by midyear: Gotye's "Somebody That I Used to Know" (featuring Kimbra), with scans of 5.5 million units, and fun.'s "We Are Young" (featuring Janelle Monae), which has scans of nearly 5.1 million units.

But reflecting the slighter softer year for digital track sales, only 15 titles sold more than 2 million units and 47, including those 15, tallied more than 1 million units in the first half of the year, versus 2011 when 17 titles passed the 2 million units milestone and 52 titles in total hit the 1 million unit mark.

Looking at store types, the chain category, which includes stores like FYE and Barnes & Noble, continues to be the hardest hit sector with sales dropping 25.6% to 23.3 million units while non-traditional stores are the only sector in the physical album space showing growth alongside download stores. As previously indicated by the growth in digital albums, download stores posted a 13.8% increase in scans in the first half, while online CD stores and other non-traditional stores like Starbucks saw album scans rise 1.7% to 15.8% million units from 15.6 million units in the first half of 2011.

Meanwhile, mass merchants experienced a 5.4% unit drop to 43.6 million units in the first half this year from 46.1 million units in the corresponding period of 2010; and indie merchants suffered a 13.8% decline to 10.5 million units from 12.2 million units in the first half of 2010.

Analysis: Pop and Rock Ruling Mid-Year Music Sales Charts

Moving over into album categories, of the large genres, the country genre was the only posting growth in the first half of the year, with a 5.8% increase in album scans to 19.5 million units, up from 18.4 million units in the first half of 2011. Rock and gospel/Christian also held up well in the first half, considering that the former category posted a 0.4% decline to 52.1 million units from 52.3 million units in the face of a 3.2% album decline for the entire U.S. album market; while the latter category only dropped 0.3% to 5.6 million units from 5.7 million units in the first half of 2011.

But looking at the other genres, Latin had the biggest drop, with units falling to 5 million units from 6.2 million units in the first half of 2011 -- a 19.7% decline. Also, R&B/rap fell 7% to 24.7 million units from 26.5%; while the industry's hot genre, electronic/EDM, also suffered a 6% unit decline to 4.9 million units from 5.2 million units in the first half of 2011 (though the genre's track sales jumped 65.2% to 46.6 million units from the 28.2 million units scanned in the first half of 2011).