Atlantic Records: Digital Music Sales Killing Physical Formats

Atlantic Records reports some “surprising” statistics (surprising for old media models at least). During the fourth quarter, digital music sales made up more than half of Atlantic’s revenues. 51% of sales came from non-physical sources such as music downloaded form iTunes and ringtones. One industry analyst quoted by the New York Times was shocked, stating “That’s very high. No one is near that,”. It’s equally surprising that this development comes as a shock. To anyone keeping an eye on media consumption, this move away from physical media is an obvious one. Some record executives are shook up by this development, wondering how they will make money in the digital world. Hmmm, maybe big record labels are kind of an anachronism? Others have been doing just fine selling digitally.

Silicon Alley Insider reports:

NBC Universal CEO Jeff Zucker calls the transition “trading analog 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.”

Silicon Alley Insider: “Atlantic Records Digital Sales Outpace CD Sales”