“The iTunes effect — or file-sharing, if you prefer — was in full force this holiday season. Album sales plunged 18 percent compared with pre-Christmas week sales in 2006. [Variety]”
Of course, this could also be because the current crop of artists are crap, that there’s no single blockbuster to lift the market, and so on. Without statistics which include legal download sales, you can’t really make a call about the state of the market.