Reading Billboard’s year-end sales assessment is bone chilling. The pace of the decline in CD sales is accelerating, reports Ed Christman:

On the down side, CD album sales declined 18.8% to 449.2 million units from the 553.4 million the CD album generated in 2006. In looking at overall album scans, including those in the digital format, the configuration dropped to its lowest total in nearly 25 years, finishing the year just north of 500 million units. According to the RIAA—the only barometer of the U.S. industry’s health until SoundScan formed in May 1991—album shipments totaled 447.2 million units in 1983 and 542.4 million units in 1984.

The record industry, of course, attributes the decline to online file-sharing, much of which is illegal, blah blah blah. Here are a number of issues on both sides of the debate that must be remembered anytime the health of the industry is discussed.

*To really appreciate the full force of the decline, consider that the population of the US in the last 25 years has grown by 30 percent or so. As the figures above indicate, digital album sales compensated for half of the hard-CD sales decline for the industry, but still: Even when you turn digital track sales into CD equivalents, you get a 9 percent net decline.

* File-sharing dwarfs these figures. Millions of folks are online with hundreds of millions of tracks available at any given time on the traditional file-sharing networks alone, with a smaller but growing number doing it even more efficiently on the torrent networks. Mp3 blogs are soon going to be a potent force in song dissemination as well.

* Traditional record stores are history. Christman reports that sales in everything from the fabled chains to more recent entrants like Borders or Best Buy declined more than 25 percent last year. Of course, Tower shut down, and the big box retailers have been shrinking their music retail space for years. But at this point you have to wonder if these outlets will be much of a force in the industry past the turn of the decade.

* I think it can be stipulated that the industry is taking a massive hit from illegal file-sharing, as the decline in the absolute number of CDs the average top-ten list amasses each week attests. That said, it should also be noted how much artificial money the industry made over the years from folks being forced to buy the same music over and over again, from LP to 8-track to cassette to CD. The entire industry was on crack through most of the 1990s as music fans from the 1960s, ’70s and ’80s rebought their collections on disc. Some of the decline in sales comes from the exhaustion of that gravy train.

* It’s a smaller factor, to be sure, but it’s worth noting that whatever percentage of the industry’s sales that came from sheer churn–replacement of lost, damaged or stolen favorite albums–is probably gone as well. A friend’s house was burglarized the other night, with his computer and iPod taken. Many people in his position might have digital backups of the actual music. He didn’t. Should he rebuy everything, or should I make new digital copies for him? If I did, would it be illegal? Even if it is illegal–would it be wrong? I don’t think so.

* It should also be noted that the RIAA’s war on file-sharing remains needlessly destructive and wholly pointless. Every computer for sale these days contains a DVD-burning drive, which in a matter of a minute or two can produce a disc with 1000 to 1500 or so songs on it, or about half to three-quarters of the music contained in the entire Billboard 200. Ever-cheaper flash drives can hold many times that. In a few years, even a rabid music fan’s entire collection will be dangling from a keychain, ready to be shared with any new acquaintance.

* As a genre, rock, for some reason, fell slightly less than the industry as a whole; that’s a subject for further analysis. The genre with the biggest sales decline was, inevitably, rap, which, Christman reported, fell by 30 percent.

Two predictions:

* It is hard to envision the traditional record company not being much more than a PR or marketing agency within a few years. While digital sales will continue to grow, the labels’ move to all-mp3 sales will eliminate the little artificial bar to unfettered movement of the tracks that exists right now.

* But even these outfits will be feckless. As artist income evolves, concert sales and mersh will become much more dependent on word-of-mouth and the efficacy of the social networking sites, subscription services and online music portals. Given that the benefits of the majors derived almost entirely from their de facto monopoly access to radio and retail, it’s hard to see how the industry hegemony of the last few decades will be seen again anytime soon.