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business newsCDs to Go the Way of Betamax, 8-Tracks, and New Coke
Quaint media format threatened with extinction.
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Remember music stores, those once-hip establishments whose pierced employees -- all of whom seemed to moonlight as bass players in multiple bands -- scoffed at your musical taste while selling you records, then cassettes, then CDs... But now, they aren't selling you much of anything.
The iconic Virgin Megastore in Manhattan’s Union Square has already closed its doors, and an equally emblematic Virgin outlet on Los Angeles's Hollywood Boulevard is slated for extinction soon.
Clearly, music lovers are finding their tunes elsewhere.
Though reports of the CD's death appear to have been grossly exaggerated, they've definitely taken a severe hit. According to Nielsen, CDs accounted for 92% of music sales as recently as 2005. In 2009, however, they account for only 60% of all sales, with digital downloads expected to account for half of all music sales by this time next year. In fact, online sales of physical albums dropped between 2007 and 2008 -- the first time that's happened in history.
The slow transition from CD to digital, however, hasn’t hurt every real-world retailer equally. As the Virgin and Tower closings indicate, many popular music chains -- including Best Buy (BBY) and FYE (TWMC) -- have been hit hard by the shift, with their share of the music market dropping over 40% since 2001.
Non-traditional outlets -- particularly Apple’s (AAPL) iTunes -- are largely responsible: Its market share has increased almost 1000% since 2001.
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