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The Music Industry's Bad Year

Many parts of the entertainment business have fared surprisingly well this year—advertising has rebounded, higher ticket prices have driven the box office higher.

But not music—it's hit quite a flat note. From CD and digital download sales to concert tickets, 2010 was a bad year. And the outlook for 2011 is only somewhat better.

Album sales are down 13 percent compared to last year. It's no secret that the CD market continues to plummet, but what's surprising is that digital downloads have not maintained their growth trajectory. Just one percent more digital tracks have sold this year than last year at this time, according to Nielsen SoundScan.

The fact that 1.1 billion digital songs were purchased this year so far is impressive. But here's what's not: This year is only up one percent while last year digital downloads grew 12 percent.

Why the decline? Piracy is rampant and it's simply hard to compete with free. That's not to say that some retailers didn't try—Amazon priced its "daily deal" new albums at $3.99. No surprise those albums shot to the top of the charts.

So who's really suffering? The music labels. The one stand alone private music label—WarnerMusic—has seen its stock bounce around, now down five percent over the past 12 months while the Dow gained 10 percent. At Universal Music Group and Sony Music Entertainment rumors of management shakeups and layoffs run rampant.

Perhaps the biggest disappointment—the concert business. For the past decade concerts have proven artists bread and butter, the one part of the business immune to piracy and the economic downturn.

Well, recession resistant it is not, and the fact that some big acts like U2 delayed their tours until 2011 delayed a hefty amount of revenue. Billboard reports a 26 percent decline in North American concert grosses and a 12 percent decrease in attendance for the year.

Live Nation Entertainment, the world's largest concert promoter and ticketing company took a dramatic hit in July when it revealed a downturn in attendance, dragging the stock off its 52-week highs by as much as 80 percent.

Now the stock's up 36 percent over the past 12 months. Why the uptick? Optimism that next year consumers will be ready to spend on tickets again and it helps that there are some big names like Christina Aguilera preparing to tour, who reliably pack amphitheaters.

There's no question Americans are invested in music—Fox's "Glee" (News Corp ) has achieved cult status both on TV and on the album charts.

Now it's just a question of how to turn that obvious excitement about music into profits for the industry.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.