Music Sales Increase for the First Time Since 2004

CDs Still Account for Two in Every Three Albums Sold

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Finally, some good news for the beleaguered music industry: Music sales are up 8.5% year-over-year during the first half of 2011, which is on track to become the first full year of positive music sales since 2004.

Digital sales are driving that growth, according to Nielsen SoundScan, thanks to significant gains in digital album sales, which were up nearly 20%, and digital track sales, up 11%.

The rate of growth in digital sales came as a surprise to David Bakula, senior VP-analytics for Nielsen Entertainment, who told Ad Age that sales figures were starting to plateau heading into fourth-quarter 2010. But a confluence of events -- The Beatles catalog finally becoming available for digital download last year, the shuttering of illegal-downloading site Limewire, the loss of brick-and-mortar stores like Circuit City and some Borders locations -- seems to have given digital music sales more momentum.

"People are becoming a bit more comfortable with digital," said Mr. Bakula. Apple's huge ad campaign around The Beatles' arrival on iTunes might have brought new consumers to iTunes who then stayed active there this year, he said. "Maybe that 's driving a demographic that may not have been super into digital prior to that ."

But it's not only digital: Even physical album sales are posting significant gains, with CDs accounting for two out of every three albums purchased. Overall sales, including physical and digital, increased 3.6% in the first half.

Adele's "21" is the year's top-selling album so far with 2.5 million copies sold in the U.S. overall, including 1.5 million physical copies. Lady Gaga's "Born This Way" also had a big debut (albeit a controversial one because of a steep Amazon discount), selling more than 1,108,000 units in its first week -- the highest first-week total since 2005 -- including more than 662,000 digital copies.

Still, 2011 has to recover from seven years of significant losses for the music industry, including a rough 2010, which was down 2.4% in overall sales and a whopping 12.7% in album sales. But Mr. Bakula thinks the upward trend in digital single sales -- the industry has been selling an average 3 million new tracks a week in 2011 -- coupled with a promising fourth-quarter release slate and aggressive music-catalog promotions from shows like "Glee" should even things out.

"I can't find a scenario that gets us negative year-over-year," he said.

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