You'll find it easy to read on the web that people now prefer to buy songs rather than whole albums that are fifteen times more expensive. Recording companies are signing new prospects to record a few songs rather than an album. The years of album sales are pretty much over. Now since album sales have routinely been a way for the recording companies to overcharge the public, you might expect me to shed no tears. After all, paying $15 for two good songs and nine bad ones is a poor deal. And many groups that were expected to record a whole album to get their hit song published were simply not up the task. But let's look at the other side of albums:
First, when a good group records an album they give you a great opportunity to learn their style. I bought a Dire Straits album just to get a recording of Sultans of Swing. The music on the album is quite uneven, but there are other excellent songs. Best of all, I learned that Sultans of Swing is an atypical song for them, off-style; yet it sounds better when you know this group's style and understand how it plays into and also varies away from their more typical offerings. Some groups, forced to record an album, must FIND heir style. This is a great exercise that the recording companies will no longer support.
Second, some albums are through-composed, intended to be listened to straight through from beginning to end. The Beatle's Sargeant Pepper's Lonely Heart's Club Band was one of the first of these. If you're wondering why there aren't many more – well it's harder to create an hour-long composition than a bunch of songs. But worse, the recording industry actively discourages them, it won't allow radio stations to play them! This assertion may sound remarkable, but I believe the FCC rule is that in one hour you can only play three tracks from a record. (We'll save classical music albums for another day, okay? Lots to say there, too.) The intention of this stupid rule is to keep people from recording a full album off the air so they don't have to buy it.
The Album-by-one-group is something of a historical accident, I think. It was simply the recording industry's best idea about how to fill out a long-playing record that could hold an hour of music. One way to see this is to imagine a different path: imagine the recording industry full of, let's call them “recording engineer artists,” or REAs. These REAs learn new music and new bands as fast as they hit the scene, and they cleverly interleave the best from different groups to create, effectively, through-composed albums of music from multiple bands (If REAs sound far-fetched to you, please note that disco DJs used to do the exact same thing, and they did it quite consciously.)
But there's no point having REAs if we can't play their full albums on the air, is there? So the album is dying, and it won't come back unless people who make recordings think creatively about it, instead of regarding the people who buy albums as a collective audience of suckers.
And by the way, there IS an excellent way for albums to make a comeback: On the web, where downloadable music can be any length at all, independent musicians do not need to compose the 3 or 4 minute songs. They can experiment with compositions of any length, and I'll bet they're doing it already.