The NPD Group, in conjunction with NARM, the National Association of Recording Merchandisers, said that consumer rejection of the CD format and use of digital files, iPods, and P2P are not the reason for the decline in CD sales.

In fact CDs continue to be the medium of choice, even among youth. People still have large CD collections. Fans both digital and physical albums.

NPD traced the primary cause to changing consumer experiences and the inability of retail stores to adapt and, well, sell. Only 13 percent of people now discover artists and music at stores. That's compared to of 37 percent for radio and 25 percent for friends and other recommendations. If stores only serve as a merchandise pickup location, they will become extinct. They need to become "champions of discovery" and strengthen selection and promotion.

This shouldn't be a surprise. Who goes to the record store today? First store business was siphoned by the superchains like Wal-Mart, and then by the digital world. Physical retailers, like the major labels themselves, need to reinvent themselves for today's world. Even so, their market will only continue to shrink.