The music industry wishes young listeners would abandon low-bit-rate compressed digital music for harder-to-pirate and more profitable CDs. There is new evidence their dream of abandonment may come true, but not necessarily with the desired outcome.

Physical media is in widespread decline. Billboard reported that CD sales sank 6% in 2011 while digital album downloads rose 20%. (Relatively miniscule, if growing, numbers for vinyl aren’t really a factor.) And who is still buying CDs in the USA? Eliminating a statistical outlier, the pan-category juggernaut that is Adele’s 21, the top-selling CD in each of the past two years has been a Christmas album (Susan Boyle’s The Gift in 2010 and Michael Buble’s Christmas in 2011). That buying demographic skews older, and when aging listeners stop buying new music (as they inevitably will), CD sales will stop merely declining and fall off the cliff. Unless, of course, a new generation of buyers replaces them.

Why are CD sales more attractive to labels than digital downloads? Legal precedent is establishing that a digital download transfers a license to the music rather than constituting a sale. Licensing is more lucrative than sales to the artist, often a 50/50 revenue split with the label for a license instead of a 10-20% royalty paid to the artist for a sale. With digital downloads hitting 1.27 billion units in 2011 and rising, that’s real money. Ask recent licensing-income lawsuit winner Eminem.

Contrary to the long-held belief that young listeners think lossy compressed music is “just fine,” Harman researcher Dr. Sean Olive has published results from the first peer-reviewed scientific test showing that young listeners will in fact choose CD-quality audio over lossy alternatives when given the choice. Has the dream of a new generation embracing CDs come true? Not so fast.

NPR intern Emily White, self-appointed spokesperson for her generation, wrote that she will never embrace physical media and prefers music access to ownership, triggering an immediate rebuttal from writer/musician David Lowery and a firestorm of debate. Ever the skeptic, I asked around. My unscientific survey of high school and college-age music consumers among my extended family and their friends confirms a strong preference for streaming services where available and a reluctant fallback to acquire digital downloads for situations where streaming services may not be available, e.g. when exercising or navigating the New York City subway system.

So while young listeners may eventually embrace CD quality digital audio, they don’t want the platter. As Dr. Olive concludes, “the challenge is to sell sound quality to kids at affordable prices and form factors they desire to own.” The new dream. –Music Think Tank