The Decline and Fall

"The market for digital downloads was worth around $981m in the US last year, around a tenth of the value of the CD market. Yet the labels' great hope is that the slump in demand for physical formats will be offset by growth in the download market. This looks wildly optimistic. The latest figures from the US reveal that while paid-for downloads are increasingly popular—up 74 per cent in 2006 on the previous year—the surge in demand is slowing. And while the total value of music sales across all formats remained more or less static in 2004 and 2005, it declined by more than 6 per cent in 2006. The trade body of the American record industry, the RIAA, optimistically predicts that by 2011, the global online music market will be worth $6.6bn; three times what it currently amounts to. This situation will, as the RIAA delicately puts it, 'leave the industry better positioned to offset physical sales.'
"Yet however it finds itself in 2011, the underlying truth is that recorded music, on or offline, has moved from being a high-margin, 'high-end' product to a low-margin, low-prestige commodity."

Robert Sandall in Prospect magazine discusses the collapse of the market for recorded music.