Atlantic Records Reaches Digital/Physical Tipping Point

Yesterday's New York Times featured an interesting article on the current state of the music industry. In it, the Times reveals that Atlantic Records has become the first major American record label to derive the majority of its revenue from digital, rather than physical sales of music. Apparently, digital sales--including sales of ring tones, ringback tones, MP3s and royalties from satellite radio and subscription music services--now account for some 51 percent of Atlantic's revenue. It is believed that Atlantic is the first major label in the U.S. to hit this milestone--data from Forrester Research suggests that the recording industry as a whole won't reach this point until 2011. “That’s very high," Forrester Research digital music analyst David Card told the Times. "No one is near that.”

Also of note are figures in the article which suggest that while digital revenues are up, overall revenues are down in the industry. According to the RIAA, music sales in the United States generated $14.6 billion in revenue in 1999. Forrester Research projects that this figure will have declined to $9.2 billion in 2013, down from $10.1 billion this year. While that's far from encouraging for the industry as a whole, there is still some good news to be had. Warner Music Group, the parent company of Atlantic, reported a net profit this year, defying analysts' expectations. One possible explanation for the company's relative success could be its leveraging of digital sales--up 39 percent this year. This suggests that while we may never see a return to the salad days of the 1980s, companies that adapt to the digital paradigm might be able to offset losses from falling sales of physical music, at least to a degree.

For more on the state of the music industry check out this New York Times article