CDs outsell Digital Music 2 to 1 – Spotify to change that?

According to a recent Nielsen Soundscan Billboard research release CDs still outsell digital albums – but for how long?

Consider first, the music industry optimism from year over year growth for the first half of 2011.    The 8.5% increase in music sales for the first half of 2011 is dominated by digital with a whopping 19% growth in digital album sales and 11% growth in  digital tracks.

Enter Spotify – trumping the reining online music streamer Pandora by giving the listener choice over what they listen to.    The introduction of Spotify in the US  add fuels to the continued furious growth of digital but dampens prospects for the monetary support necessary to sustain or grow revenue, at least initially.  The first six months of Spotify is free.  Assumedly the enchanted new Spotify user will transition seamlessly into purchase mode or immediately fork out $9.99/month for the everything/mobile version.  But that adoption curve is as yet unknown.

The most likely early Spotify user, Forrester’s 12-15 year old Digital Native, is not only very comfortable with the digital downloads, they also embrace the idea of sharing instead of owning music. They aren’t attached to CD ownership.   Their 7 weekly hours of music listening can easily be transformed by the choice and access provided by Spotify.   What is yet to determine is whether the Digital Native is able to and/or will choose to put down cash for Spotify.

CDs domination is most definitely challenged by digital growth and the contest is accelerated with Spotify entering the market.  Digital downloads without the revenue… or long-term growth strategy for the music industry?  Stay tuned!