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Has Spotify killed the iTunes star? Download sales slow as streaming picks up

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Nielsen says overall sales of tracks and albums for first half of year are down 4.6 percent

Spotify for iOS
Spotify for iOS

For the past two years, record labels, music retailers, and artists carefully tracked music sales. After a decade of massive sales declines, the downward spiral appeared to bottom out in 2011 and 2012 and the hope was that the darkest period in the sector's history was over.

But figures released by Nielsen and Billboard today show a 4.6 percent decline in overall album and track sales for the first half of 2013. Sales of digital downloads, the distribution mode that enables buyers to store song files on PCs or mobile-phone hard drives and were once thought to be the successor to the CD, were down 2.3 percent. Nielsen also reported that sales of album downloads were up 6.3 percent while CD sales plummeted 14 percent.

The decline in digital-track sales isn't good news for Apple The decline in digital-track sales isn't good news for Apple, the top music retailer. Downloads are the backbone of iTunes' music business. The good news is that the slide in downloads can be traced to the shift among music fans to streaming services, such as Spotify, Pandora, Rdio, and YouTube. All offer large quantities of music free of charge with varying restrictions that most of the companies will remove in exchange for a monthly subscription fee. "Streaming continues to be a tremendous growth story, with over 50 billion audio and video streams [during the first half of the year]," David Bakula, a Nielsen executive, said in a statement.

The number of total mid-year streams rose by 24 percent, according to Nielsen. What we don't know is whether streaming can be as lucrative as selling 99-cent downloads. Not one of the streaming services have reported profits. Total mid-year streams rose by 24 percent

Nonetheless, Apple is getting in on the streaming craze sometime this fall when it launches iTunes Radio. The service will work much like Pandora but iTunes Match subscribers will not be served ads. The hope of many in the music industry is that iTunes Radio, which makes it easy for users to purchase songs they hear via the service, will stimulate download sales.