In a first for the industry, Warner Music Group subsidiary Atlantic Records says its digital sales made up more than half of its revenues during the fourth quarter — about 51%.
Digital sales include songs sold through services like Apple’s iTunes and ringtones.
The news shocked industry watchers. “That’s very high. No one is near that,” digital music analyst David Card told the New York Times.
Moving from the way people used to consume content to the way they want to now has been expensive and difficult for the large companies that minted money doing things the old way.
NBC Universal CEO Jeff Zucker calls the transition “trading analogue dollars for digital pennies.”
Atlantic, which claims it boosted digital sales without a precipitous drop in CD sales, is mostly alone in the industry with its success. Eight years ago, music sales were $14.6 billion. This year they’ll be $10.1 billion. Forrester Research says they’ll drop to $9.2 billion by 2013.
It’s worth wondering if costs cuts associated with producing fewer physical CDs won’t mean record labels will get to keep a larger enough portion of that smaller revenue to make the transition bearable if not beneficial. But grumpy record label execs aren’t ready to concede that point.Says former EMI exec and current Boston Consulting Group senior partner John Rose: “It’s not at all clear that digital economics can make up for the drop in physical.”
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