Music industry: CD-burning worse than file-sharing

The data, compiled by the market research firm NPD Group, suggested that about half of all recordings obtained by music fans in 2004 came from authorized CD sales and about 4 percent from paid music downloads.

"CD burning is a problem that is really undermining sales," Bainwol said in a phone interview before addressing about 750 members of the National Association of Recording Merchandisers in San Diego on Friday.

"(Copy protection technology) is an answer to the problem that clearly the marketplace is going to see more of," he added.

North American album sales down about 7 percent this year compared to a year ago, according to Nielsen SoundScan.

Yet, the recording industry has seen a lift from online music sales, which when factored in with album and sales of CD singles boost overall music sales through July to 21 percent over last year.

That's little consolation to many brick-and-mortar music retailers, who traditionally have depended on CD sales. Music DVD sales, which had been a source of good news for retailers, have also begun to slow, said NARM President Jim Donio.

"There is justifiable concern among our members," Donio said.

As more music fans show a preference for purchasing music online, traditional music retailers should consider exploring offering digital sales as well, either on their Web sites or in-store computer kiosks, Donio said.

Bainwol stressed he doesn't expect online file-sharing to go away entirely. The entertainment industry gained a victory with a Supreme Court's decision in June that said they can file copyright lawsuits against companies caught encouraging customers to steal music and movies online.

With all the attention the RIAA has placed on online file-sharing in recent years, the focus on CD burning Friday was welcomed by music retailers like Alayna Hill-Alderman, who said she's seen music CD sales slide in recent years while sales of blank recordable CDs have soared.

"We are feeling the decline in our store sales, especially with regard to R&B and the hip-hop world," said Hill-Alderman, co-owner of Record Archive, a two-store company operating in Rochester, N.Y. "It's all due to burning. We've lost tremendous amounts of those sales to flea markets and bodegas."

After experimenting with copy-protected CDs in Europe and Latin America in recent years, some record labels have begun releasing albums in North America with similar copy restrictions. The CDs typically allow users to burn no more than a handful of copies.

Velvet Revolver's "Contraband," released last year, was equipped with such copy-protection technology and grabbed the top sales spot in its debut week.

Some saw that as a sign music fans didn't mind CDs with copy restrictions. But other releases since, such as the latest Foo Fighters album, have sometimes spawned fan complaints that the restrictions go too far or create technology conflicts with portable audio devices.

Simon Wright, chief executive of Virgin Entertainment Group International, which oversees the Virgin chain of music stores, said he's in favor of labels releasing more albums in a copy-protected CD format, regardless of the potential for consumer backlash.

"If, particularly, the technology allows two-to-three burns, that's well within acceptable limits and I don't think why consumers should have any complaints," Wright said.