John Gerome from The Associated Press is reporting:

Music sales have continued to slump in 2008 as the increased number of downloads of digital tracks failed to make up for a plunge in the sale of compact discs.

Year-end sales figures released Wednesday by The Nielsen Co. show total album sales, including album equivalents made up of single digital tracks, fell to 428.4 million units, down 8.5 percent from 500.5 million in 2007.

Physical album sales fell 20 percent to 362.6 million from 450.5 million, while digital album sales rose 32 percent to a record 65.8 million units.

Digital track sales, such as those conducted in Apple Inc.'s iTunes Music Store, were up 27 percent from last year, breaking the 1 billion mark for the first time at 1.07 billion.

The report continues a troubling trend for the recording industry, which has a harder time maintaining profits when consumers buy single songs instead of albums. The number of transactions rose 10.5 percent to 1.5 billion, although the figure treats single track and whole album purchases the same.

"You can see the overall unit sales as a positive, but their model is really built on album sales and that just continues to decline," said Silvio Pietroluongo, director of charts for Billboard magazine.

"Music consumption has never been at a higher clip, it's just a matter of trying to turn it into revenue," he added.

Some record labels are making progress. Craig Kallman, chief executive of Warner Music Group Corp.'s Atlantic Records, whose artists include Kid Rock and T.I., said his label passed a milestone in the year to September by having its digital revenue exceed that from physical CD sales.

The label, the top-selling in the U.S. in 2008, has had to become more careful in choosing which artists to promote and more patient in waiting for their songs to break out, he said.

"You have to really be right about your hits. If you're going to invest that amount of time in them and not run as many records, you have to be way more right today than wrong," Kallman said.

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