Music Sales Fall, CBS and Yahoo Explore Ad-Support

Some very interesting announcements in the last 24 hours.

First, the IFPI announced that in 2007 global music sales fell by 10% and digital sales, which tripled in 2005 and almost doubled in 2006, grew by only 40%. Global digital music sales were $2.9 billion and at this declining growth rate probably won't replace even a quarter of lost CD sales.

Second, last.fm announced that it was entering the ad-supported music space and rumor has it that Yahoo will also. There is a lot of coverage of this move by last.fm. Basically, in addition to its Internet radio service. last.fm will enable users to select and listen to any track up to three times. This service will be supported by advertising, which I believe will be typical website ads.

Regarding Yahoo, here is what the AP is reporting: "Yahoo Inc., is in early discussions with major record labels over offering unprotected MP3s either for sale or for free as part of an ad-supported service, two record company executives familiar with the talks said Wednesday." The real question is whether or not Yahoo will launch an ad-supported download service.

As many bloggers have commented, there is nothing new about what last.fm is offering and Yahoo may also offer just more of the same. What is new is that CBS and Yahoo would be the biggest companies to move into ad-supported digital music.

According to Quincy Smith, president of CBS Interactive big media companies may be the key to making ad-supported music a success. "Only media can bring those kinds of sponsorship relationships," he said in an interview with CNET News.com.

I don't agree with Smith that only big media companies can make ad-supported music a success but their participation sure won't hurt.