Digital album sales aren’t falling off a cliff, but they are experiencing a sustained decline for the first time. A Billboard analysis of Nielsen SoundScan data has found that after seven years of strong growth, digital albums are finally starting to show signs of old age.

In 2010, digital album sales have, for the first time, gone through three consecutive quarters of negative growth. Unit sales were down 5% in the first quarter, down 7% in the second quarter and down 3% in the third quarter. In the fourth quarter of 2009, sales reached 22.9 million units, a 28% increase from the third quarter and the highest quarter on record.

It is natural for sales to slip for a quarter or two. Second quarters tends to be slow– first quarter sales are usually strong – and the release schedule in any given quarter could be a bit lackluster. Digital album sales actually dropped 1% in the second quarter of 2006 after growing 40% and 30% in the previous two quarters. In the following years, the second quarter sales have always been lower than first quarter sales.
Unlike tracks, digital albums are actually up this year -- 12% through October 24. Track sales are down less than 1% this year.





But now digital albums’ growth trajectory is similar to that of tracks. The week ending October 10 was so bad that year-over-year digital album sales actually reached negative territory and fell less than 1%. It was the first such deficit of the year. That week’s total of 1.42 million units was the lowest weekly sales total of 2010 and the lowest since December 2009.

Here are some thoughts on this trend:
-- This drop is not a surprise and not a reason to write off the album format. Digital tracks, albeit aided (if only slightly) by a rise in prices, had already lost momentum at this time last year. Digital albums were destined to fade as well, although with a lag time of a year or two behind tracks. These trends show the download market has become mature. Growth is now harder to come by.

-- The fourth quarter (not reflected in these numbers) should bring at least a temporary turnaround for digital albums. A release schedule weighted to the fourth quarter means more sales at the end of 2010 and early 2011. Fueled by sales of gift cards and new hardware devices, digital sales tend to retain some of their holiday momentum in the early part of the following year.

Already in the fourth quarter there has been a strong digital performance by Kings of Leon’s new album, “Come Around Sundown.” Next week’s chart will have Taylor Swift’s new album, “Speak Now.” Also coming in the fourth quarter are new releases by Kanye West, Keith Urban, Rascal Flatts, My Chemical Romance, Norah Jones, greatest hits collections from Pink and Bon Jovi and unreleased music from Bruce Springsteen. Artists such as Josh Groban, Susan Boyle and Neil Diamond, on the other hand, are likely to have CD-centric fourth-quarter hits.

-- Much of the digital album growth in 2010 came in the first quarter. Unit sales are up about 7.3 million units this year. About 41% of that gain came in the first three months of the year and most in the month of January. Since April, year-over-year gains have been smaller.

-- This trend should put extra pressure on record labels and publishers to speed the arrival of next-generation products and services.