Lou Reed's album sales may have risen 607% in the US last week, one of many tributes to New York's rock'n'roll poet of the streets, but that did little to dispel the black mood that has descended on the music business.

The U.S. music industry, the world's largest market, has experienced a drop in album sales from 800 million in 2002 to 316 million a decade later. But industry analysts say that long-term trend doesn't account for a sudden drop-off. It seems that the 10-song, artist-statement format that originated with the advent of the 33⅓ long player in the late 1940s could itself be nearing the end of the line.

Last week U.S. album sales, as measured since 1991 by Nielsen Soundscan, fell to a new low of 4.49 million at the time of year when the industry typically rolls out its big acts before the holiday sales boom. Katy Perry's No 1 album Prism sold less than 300,000 copies, but that was still more than the next eight titles combined – among them Pearl Jam and Drake.

Despite energetic twerking and taunting Sinéad O'Connor on Twitter, Miley Cyrus's Bangerz – No 1 two weeks ago – fell to fourth place with 43,000.

Even acts with loyal, older and often technologically challenged audiences are finding sales hard to come by. Elton John and Paul McCartney's releases failed to find any commercial footing, with Sir Elton's The Diving Board selling just 11,116 in its third week of release.

"The album is dying in front of our very eyes," industry commentator Bob Lefsetz wrote. "Everybody's interested in the single, and no one's got time to sit and hear your hour-plus statement."

Analysts blame Spotify, YouTube and other cheap or free streaming services for broad declines that include a 4% drop in digital downloads – the first since Apple's iTunes was launched a decade ago. Despite opposition to Spotify from songwriters, who say streaming services pay so poorly they threaten what remains of a meager living, streaming now contributes 16% of the industry's revenues.

Album sales, analysts say, are further threatened by fragmenting of genres, the poor quality of music and shopping chains carrying a limited selection of discounted releases to bring in customers.

To understand the shift to a market dominated by singles and streaming, the industry has introduced a new measure, TEA (track equivalent albums) which counts 10 track sales as one album. If the TEA measure is used, Bangerz, which only sold 245,000 traditional copies in its first week, rises to 750,000 sales.

If consumers are tiring of buying single-track downloads – 1.1 billion a year are sold at present – and turning to streaming services, up 59% on last year, according to the Recording Industry Association of America (RIAA), is that good or bad for the album?

Ed Christman, of the industry publication Billboard, said there was no definitive data to show streaming was cannibalizing traditional sales, but added that in terms of revenue it took 2,000 streams to equal one album.

He said: "Is the album going away? People have been speculating about that forever. There are those that think the album should go away and plenty of artists who still believe in the album." If albums are still selling 300 million copies, it's unlikely to be abandoned. "It's up to the artists to decide what happens to it."

One school of thought holds that the decline of the album is related to the introduction of the CD. Musicians were able to put out 80 minutes of music – far more than the LP, limited to 21 minutes a side – making for often self-indulgent releases. Others argue that music released in physical form should be abandoned. But as other media have discovered, physical formats still command a premium in both value and prestige.

"Consumers are fickle beasts – they want choices," said Christman.

Artists may be sceptical – former Talking Heads frontman David Byrne has pulled as much of his back catalogue out of Spotify as possible, while Radiohead's Thom Yorke calls it "the last desperate fart of a dying corpse". But the record industry is getting behind streaming.

"A variety of access models are collectively generating a healthy amount of revenue for labels and artists," says Jonathan Lamy, an RIAA spokesman. "When you add up revenues from all of these models, they represent real revenues now and prospects for a bright future."

But it's still to be seen whether streaming can ever be as a profitable as albums. "You just don't know," said Christman. "It's like asking how big the universe is. Right now it's a small universe."

For Bob Lefsetz, the message to artists is straightforward – hype doesn't work, you have to connect to your audience even if that means only putting out one good track.

"You put out these albums and in almost every case, the public moves on in a matter of weeks! A few bought it, they heard it, and they're satisfied. The rest of the public is just waiting for a hit single ... they'll tap their toes and snap their fingers and ask, 'What else have you got?

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