Stuart Bruce wrote:

CD sales across the board are dropping. This creates a vicious cycle of competition that means that major record labels are leapfrogging each other, always trying to push 'the next big thing' (because first albums tend to sell more than second and third albums)....

and...

Ultimately the reason that bands like the Orb get dropped are because they aren't selling as many records as the record company need them to, and while there are various factors to that...

There is a weird inability to scale back promotion and expenditure with the major labels. If your 1st album sells 500,000 and your second 100,000 they drop you, because they spend the same amount promoting both albums. If they spent 1/5th the money on the second one, it would be just as profitable per unit as the first, but despite this pattern happening to 90% of artists, they never learn from their mistakes - probably because promotional budgets are recouped from artist royalties. Another weird thing is that singles are now promoted for many weeks before release in order to pile up demand for a high entry into the charts. I do occasionally buy a pop single, but I have recently been going off tracks before they even reach the shops. Another factor is the self-inflicted bad value for money rules on CD singles, where you can only have 3 tracks totaling 20 minutes to qualify as a single (as opposed to 4 and 40 minutes). If the record companies deliberately give us worse value for money, of course sales will fall!

...

whole load of people out there who still don't have the bandwidth/time/knowledge to download MP3's, so surely the whole percentage fall can't be attributed to people who download this stuff!

Not the whole percentage fall. But a significant portion of it is caused by the availability of bootlegs.

Don't forget the drop in sales is caused by the gradual decline in people who are replacing old vinyl albums with new CDs of the same material. Once we have all repurchased the ones we want, that market collapses. I expect that will account for a far bigger drop in sales than bootlegging will - there is plenty of anecdotal evidence that bootlegging actually boosts sales, I know I have bought quite a few CDs because I have been able to hear enough of them via the net to know they would be a worthwhile purchase. - Andy_R

now that stuart's chimed in... well, i just cant help it :) the reason cd sales are going down isnt because music enthuseists and hackers are starting to download mp3s. its happening because The Masses are downloading music instead of buying music. kazaa and programs like it are really part of the problem. its cool that people can swap music. it isnt cool that Everyone can, and does, abuse the privlage. its like capitalism... you can always kill people's questioning by making them feel good. its why george bush is in office. its why people download music on kazaa and dont feel bad about it. an idea i'm surprised no one has thought of might be just giving people the ability to download links to songs, rather than actually downloading the songs in their entirety. this first dawned on me when my sister came home from college for the summer and brought her computer home with her. to her dismay, she found that now, half the songs on her harddrive wouldnt play. when i looked at the "songs" she thought she had, i discovered they were actually links to streaming audio, rather than actual songs, and since this was the first time her computer had been disconnected from the lan, she had never known differently. the benefits to this are that record companies could actually keep track of who's listening to what and also give people an extremely effective alternative to kazaa. it'd be so much easier than having to hunt for rare tracks and so forth... all you'd have to do is search, and there it is. also, if the songs are just links on your harddrive, they couldnt be burned to a cd...! if people want to have a copy on their harddrive that they can use for burning and so-forth, theyd have to BUY IT! *gasp* (or have one of their friends burn them a copy... but still, not as damaging as the kazaa paradym). most people would initially say "ha! if i could listen to links, i'd never buy another cd again!" to them, i say, this: when instant messanger became free, me and my friends skoffed at how none of us would ever have a reason to get aol again... but then everyone wanted aol all of the sudden because they had the largest userbase... i dont think it was a coincidence at all. if keeping links on your computer means you can have better access to more music for free, i think people would buy into it and drop kazaa like a rock (except for maybe downloading photoshop, etc). still, there are thousands of ideas beyond this that are just waiting to be thought out. the real reason that the record companies are dying ISN'T because of mp3s, its because of the record company's REACTION to mp3s. if the record companies worked with apple and microsoft, they'd find that both companies already have very efficient systems set up for keeping personal collections of music and using them in legal, efficient, and occationally fun (!!!) ways. services like kazaa need to be crushed, not through legal bullshit, but actually replaced by alternatives that really are better and also controllable. its really the only choice. bottom line: if the industry would start attempting to provide better products to consumers, rather than trying to punish them for their evil deeds, i think things would turn around very very quickly for the record industry. until then... go vinyl! :-D