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Touring and festivals are also feeling the pinch, and some are cutting way back on their gigs. Festival producer Van Hohe dramatically scaled down his schedule, paring back from 23 dates to three last fall. Churches that host festivals are often faced with a choice between maintaining a regular schedule with lesser-known acts, or holding out for headliners. "There's a real impact on how much a church is able to afford," Hohe says. "Most are saying, 'Let's wait,' as opposed to, 'Let's make this less of an event.' They want the quality, not the quantity." Still, Hohe expects that touring might be the most resilient sector of the industry. "It doesn't matter what happens with the music business. You cannot download the live experience. We still have that to offer. There may be fewer shows, but people will come."

Meanwhile, smaller acts have actually benefited from the economic woes. Mitch Parks of After Edmund notes that upcoming bands are "less expensive" and are thus "getting more chances to fill bigger roles, play bigger tours and more dates." Smaller crowds may also mean stronger connections with an audience that prefers a niche.

Record sales are crumbling, even though music consumption is up 30 percent since 2004. But album sales—the physical product, like CDs—are "about half of what they were 10 years ago," says the GMA's Styll. "That is a function of people stealing music." But it's more than that. Copying CDs is a major issue, along with the ubiquity of music on the Internet, through satellite TV and radio, and on portable devices. "It's like All-You-Can-Eat music," says Styll. "People today don't feel the need to own music."

On the bright side, Christian music is doing slightly better than the music industry overall, with a current sales pace 5 percent behind last year compared to an 11 percent lag in the mainstream.

"Flat is the new up," says Bill Nielsen, VP for merchandising at LifeWay Christian Stores, noting the phrase used to describe sales of recorded music. "We hear this from nearly every key partner. Times like these really test everyone's resolve. It takes courage and creativity to continue supporting a declining category like recorded music to the degree that we are." John Mays, Vice President of A&R for Centricity, doesn't think that fight will last too long: "No one wants retail to go out of business. But down the road I don't see a lot of physical product being sold."

Record labels are in dire straits, with many restructuring and some disappearing altogether. As EMI-CMG's Thompson puts it, "The labels are bleeding out of the eyes, because they're spending money to make records and they're trying to market the records, but then the people who like the records just take them. It's gone from being a theoretical problem of what piracy is doing, to an actual body count." Centricity's Mays says the body count translates to his estimation that about 50 percent of record label employees have been laid off since 2000.

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