While some record label executives wonder how music retail will respond if CD sales plummet another 20% this year, merchants themselves don't seem so worried -- especially given a number of sales and distribution strategies now on the horizon.

In a classic chicken-and-egg dilemma, labels have begun blaming declining CD sales on music merchants diversifying too soon and too heavily into other product lines. Merchants, conversely, argue that labels aren't doing enough to stem the tide -- like, say, lowering CD wholesale pricing, which could help make the category more profitable. As retailers continue to vary the products on their shelves, labels are changing how they handle catalog releases and charge stores for product. And both sides are experimenting with bolder pricing ideas.

Fewer Stores, Shrinking Floor Space

Retailers acknowledge that consumer migration to digital music channels has been a significant cause of the sharp drop-off in physical music sales. But they also say that huge 2009 sales of certain titles- -- Michael Jackson and Beatles albums, for example, and Susan Boyle's "I Dreamed a Dream" -- demonstrate that some consumers still want the CD.

Digital inroads aside, brick-and-mortar retailers say a big factor behind the CD's decline has been predatory pricing by big-box merchants, which has turned the format unprofitable for most record stores. This has led to store closures and shrinking space for CDs in those stores that remain open, as merchants expand into more profitable product lines.

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