Thanks to dormant holiday sales, the music industry is ending 1996 on a sour note. For the first time in more than a decade, music hawkers are in jeopardy of posting a drop in annual sales.

Post-Thanksgiving sales are down 13 percent from last year. Before Christmas, there was only a 2 percent increase over the same period last year. Since nearly a quarter of all album sales occur in the final six weeks of the year, analysts predict that the $12 billion industry might actually see a decline in units sold. That's shocking news to execs accustomed to seeing 12 percent to 20 percent growth over the last 10 years--especially after a sluggish 1995.

There were more busts than blockbusters in 1996. Celine Dion, Toni Braxton, the Fugees and Metallica all notched multiplatinum discs, but highly anticipated albums by Hootie and the Blowfish, R.E.M., Nirvana, Pearl Jam, Sheryl Crow, Soundgarden and Counting Crows fizzled.

Some of the year's best-selling albums came from last year. Old releases from Smashing Pumpkins, Bone Thugs-N-Harmony and Tracy Chapman scored multiplatinum sales. The top-selling album of 1996 was Alanis Morissette's 1995 Jagged Little Pill.

It was a year that saw the Wherehouse, Camelot Music and Peaches Entertainment chains file for bankruptcy protection, and the nation's largest chain, Musicland, on the brink. Five of the six major labels had layoffs.

Excuses for the stagnant market are rampant. Among the reasons cited for lagging album sales: The CD-replacement phenomenon is over. Boomers have replaced their old vinyl LPs with shiny CDs and aren't interested in new music.There are too many toys. We've got CD-ROMs, Web-TV, 150-channel cable TV, satellite dishes, home video and video games all competing for entertainment bucks. We have a surplus of music. There were nearly 27,000 releases this year, more than ever before. Most of them stunk.Nobody's found the next Seattle. Grunge, which lit up sales in the early '90s, is passe, and no new music trend has caught on. Performers have less MTV and radio exposure. Videos make up a smaller piece of the MTV pie. New acts can't crack strict, formulaic radio playlists.Wave cassettes bye-bye. Labels and retailers push CDs and practically ignore tapes, thus sacrificing profits.Give us another Kiss. Concert grosses are up by a whisker, but the mega-stadium tours of the '80s have disappeared.Perhaps record companies will be singing a happier tune next year. Analysts predict that musical Darwinism will force labels to scale back product volume and focus on higher quality albums.

And some positive trends bode well for 1997: Twenty-three new artists had gold or platinum discs; country music still sells well; soundtracks are doing better than ever; and the overall economy is strong.

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