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Atlantic records digital sales account for more of its profits than other labels

Digital music sales are great for the consumer, but represent a low margin market for the music industry. Record companies would rather sell you a CD than a digital MP3 because the CD is worth more money.

Despite what record companies would prefer to sell consumers, digital music is booming. With the top music retailer now being the iTunes digital music store, record labels are left scrambling to find new ways to eke out profits in a changing market.

One question that has been on the minds of record executives since the digital age dawned is when digital sales will surpass sales of CDs and physical media. For Atlantic Records, that time is now. Atlantic has reported that more than half of its music sales in America now come from digital products. The digital products include full track sales form iTunes and things like ringtones, callback tones and more for mobile phones.

Warner Music Group, the parent company for Atlantic reports that digital sales are only 27% of its entire revenue for music, despite the 51% digital sales that Atlantic is boasting. Getting more than half of its revenue from digital sales isn’t necessarily a good thing for Atlantic. While the digital slice of the revenue pie grew, the pie itself is shrinking according to The New York Times.

The New York Times cites research form Forrester Research that estimates music sales in America will decline by 2013 to $9.2 billion from $10.1 billion this year. Back in 1999 before digital music was so popular, music sales were $14.6 billion. It is quickly becoming clear that digital revenue will not replace the revenue from the heyday of physical media.

The record industry is trying everything to bring more profitability back to the record industry and many of the largest record labels have embraced a new music format called slotMusic. The hope is that by combining the consumers preference for digital tracks with a physical medium, in the case of slotMusic a microSD card, revenues will increase.

Many music fans simply see slotMusic as a probable failure that will not take off. It makes little sense to most music lovers to pay extra for a microSD card when the digital tracks themselves are significantly cheaper than a slotMusic album.

The high percentage of income from digital media for Atlantic is in stark comparison to the digital revenue from other labels and media companies. NBC for example counts digital sales as a small portion of its income with digital raking in $1 billion of the $15 billion NBC makes.

Sales of CDs reportedly still account for about 2/3 of music sales for most labels. Perhaps Atlantics mix of artists, whose popularity among the younger and typically more tech savvy age groups make the music more appealing in digital sales. Atlantic counts among its artists rapper T.I., Kid Rock, and Death Cab for Cutie. You don’t have to travel far to hear tracks by these artists as ring tones.

David Card, digital music analyst for Forrester research told The New York Times, "That’s (digital sales) a lot. That’s very high. No one is near that."

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Physical Media is winding down.
By Shig on 11/28/2008 3:50:55 PM , Rating: 3
Physical media is coming to a close in the cyber age, simple fact. This is already happening with games, movies, and TV already.

Any sort of reasonable internet connection makes physical media obsolete in my eyes. D/L it, slap it on flash HDD or a normal HDD, watch it, play it, listen to it, get rid of it when you're done / bored, re download it for free anytime you want in the future (assuming you paid for it in the first place).

Which makes one wonder is that why US broadband is so bad atm? After reading the article is sounds like these big corporations that live and die on these medium will do anything to prevent this cyber conversion. Cry, kick, and scream all they want, its happening.




RE: Physical Media is winding down.
By ninus3d on 11/28/2008 8:41:49 PM , Rating: 2
Amen!
One of the biggest selling point a game can have for me is wether or not its avaiable on steam.


RE: Physical Media is winding down.
By hadifa on 11/29/2008 12:21:44 AM , Rating: 2
Steam is great and all but if a game is available on both steam and totalgaming, I would go with the latter.

http://totalgaming.stardock.com/store/

Ant their 10 Commandments For Games

* Gamers shall have the right to return games that don't work with their computers for a full refund.
* Gamers shall have the right to demand that games be released in a finished state.
* Gamers shall have the right to expect meaningful updates after a game's release.
* Gamers shall have the right to demand that download managers and updaters not force themselves to run or be forced to load in order to play a game.
* Gamers shall have the right to expect that the minimum requirements for a game will mean that the game will play adequately on that computer.
* Gamers shall have the right to expect that games won't install hidden drivers or other potentially harmful software without their consent.
* Gamers shall have the right to re-download the latest versions of the games they own at any time.
* Gamers shall have the right to not be treated as potential criminals by developers or publishers.
* Gamers shall have the right to demand that a single-player game not force them to be connected to the Internet every time they wish to play.
* Gamers shall have the right that games which are installed to the hard drive shall not require a CD/DVD to remain in the drive to play.


By AnnihilatorX on 11/29/2008 11:47:21 AM , Rating: 2
Impulse from Stardock is much better than Steam. I hope more games will be on Impulse than Steam.


RE: Physical Media is winding down.
By mpjesse on 11/28/2008 10:35:33 PM , Rating: 3
US Broadband is not "bad." It's easy for a European, who's country is the size of just ONE of our larger states, to sit back and criticize the U.S.'s broadband penetration. Let me point out a few things:

90% of all U.S. internet users have access to broadband. We went from ~50% to 90% in a period of just three years. When you consider the shear land mass and population of the U.S., that's pretty damn good.

Second, if you look at the broadband penetration figures worldwide, all the leaders are small countries like Greece, Germany, U.K., etc. You don't have to be a genious to figure out why penetration is so high in those small countries.

Third, in relation to land mass and population, the U.S. has the highest broadband penetration rate of any country in the world. Heck we still beat out small countries like Italy, Ireland & Switzerland.

The U.S. is a sprawling country with a good percentage of the population living in small rural towns sometimes hundreds of miles away from a large (connected) metropolitan area. Upgrading equipment, fiber, etc to get these small towns on broadband requires a lot of capital and investment... neither of which have quick profitable returns in rural areas. I'm going to assume you're European... if you are, how far are you from a metro area? Chances are no more than 50-70 miles, if that.

Despite what the rest of the world thinks, the U.S. is far from "bad" in broadband. In fact, I do not know a single person who doesn't have broadband or have access to it.


RE: Physical Media is winding down.
By vorantz on 11/29/2008 5:51:25 AM , Rating: 2
US broadband IS bad
he wasn't talking about coverage but the caps you guys have
and those suck big time :P


By CyborgTMT on 11/29/2008 7:46:39 PM , Rating: 2
Exactly, dollar for dollar US broadband is way behind the rest of the world in terms of bandwidth. The problem lies in areas dominated by a single ISP or only a couple of options available. In my area you have Comcast or Version (not FIOS) to choose from. Both are priced relatively the same so it comes down to how you want the service delivered, phone line or cable. Neither has incentive to raise their pipe speeds or lower costs as there is no alternative. By comparison, a city with the same population as my in England has over a dozen options to select from. In the US you have five big players; AT&T, Comcast, Version, Time Warner, and your area baby Bell. They saturate their respective areas and lock down pricing and speeds with their monopolies. They own the phone lines and cable lines and no one else gets in unless they pay for using the infrastructure which means they can't undercut them on price and are bandwidth capped. So right now unless some other company comes in and drops their own lines, not much is going to change in the US.

One alternative was taken by a town just north of me. They set up a city owned fiber network. Every house in town has a fiber line running to it delivering everything from TV to internet. They also set up free wireless in the area to support the local college. Because of this Comcast's internet service in the area cost $15 less than it does for me 20 miles down the road.


RE: Physical Media is winding down.
By erikejw on 12/1/2008 1:47:16 AM , Rating: 2
One thought comes to my mind.

DENIAL


By Bateluer on 12/1/2008 8:09:32 AM , Rating: 2
US broadband penetration rates are inflated because the FCC defines broadband speeds as 200 kilobits per second, speeds that would be scoffed at by anyone on even your average US cable internet.

US broadband speeds are still a joke.


RE: Physical Media is winding down.
By dubyadubya on 11/29/2008 11:07:17 PM , Rating: 2
Yes physical media is winding down. The trouble is the compression used lowers the overall quality. An audio CD will sound better than its compressed counterpart no matter how high the bit rate is. No person with a decent home stereo will settle for compressed audio content such as MP3's. You might as well listen to a $5 Ratshack flavor radio. I fear the day when all media is compressed garbage. Long live LP's, CD's SACD's etc.


By mindless1 on 11/30/2008 6:03:45 PM , Rating: 2
Compressed well and at a high enough bitrate, nobody including you can hear the difference vs a CD on even high end gear. That's not even considering lossless compression, just very high bitrate MP3s opposed to the typical 192Kbps or lower tracks distributed most often.

Thinking it's similar to a $5 Ratshack radio is just silly. When push comes to shove many even think an LP is worse than 160Kbps MP3, unless the track was only released on vinyl and the artist intended it to sound different because of that.


By Bateluer on 12/1/2008 8:15:16 AM , Rating: 2
Few people can tell the difference between the usual 128bit MP3s from iTunes, the 256bit MP3s from Amazon, custom ripped 320bit MP3s, or from the audio CD itself.

Either way, if you insist on having uncompressed audio and physical media, that option will still exist. You'll pay more for it, but you'll have that option still.

Still, I would like to see more places offering lossless tracks so I can convert them to MP3 or Vorbis myself. I like to have the control.


Digital?
By nineball9 on 11/28/2008 12:00:44 PM , Rating: 2
Audio CD's are digital. Perhaps they meant Internet/online/MP3 sales have increased instead of just "digital" sales.




RE: Digital?
By IceBreakerG on 11/28/2008 12:43:17 PM , Rating: 5
Digital as in not tangible or physical.


RE: Digital?
By Screwballl on 11/28/2008 1:22:48 PM , Rating: 2
nineball had it correct, the story used the wrong terminology.
vinyl records are analog
CDs are digital, but may be converted to an analog output such as CD player in the car.

I think proper phraseology in this story should have been "sold online or not through a physical medium such as discs"


RE: Digital?
By Hare on 11/28/2008 1:33:27 PM , Rating: 2
quote:
CDs are digital, but may be converted to an analog output such as CD player in the car.

I don't care about semantics or terminology but you just made absolutely no sense...


RE: Digital?
By Bruneauinfo on 11/28/2008 2:08:51 PM , Rating: 2
if CD's produced digital music from your CD player you would hear 000111100011100011010010001001010

sound is analog


RE: Digital?
By Lifted on 11/28/2008 3:34:24 PM , Rating: 2
Would that be in your voice?


RE: Digital?
By omnicronx on 11/28/2008 4:06:33 PM , Rating: 2
Hahaha I asked the same question to some guys who were running that well known scam out of a back of a van. They said they were 'digital speakers' and I started to laugh. I basically ruined their scam on 3-4 people when I asked what 1's and 0's sounded like and proceded to tell them there is no such thing as 'digital sound'.


RE: Digital?
By omnicronx on 11/28/2008 3:58:44 PM , Rating: 2
quote:
CDs are digital, but may be converted to an analog output such as CD player in the car.
Last time I checked ALL audio is analogue when outputted. It doesnt matter what the source is, at one time or another it will be converted to analogue. (unless it was in that state already).

As for the original poster, the term digital music sales refers to a digital media such as mp3 and not CD's or DVD-A or SACD's. If the article had stated digital medium/media then that would be a different story.


RE: Digital?
By spread on 11/30/2008 1:25:11 AM , Rating: 2
Digital Music, Analog Output


RE: Digital?
By 9nails on 12/1/2008 12:56:33 AM , Rating: 1
Audio can be pure digital from source to the ear.

It is true that audio once needed to be converted from Digital sources back into analog to be amplified, but advancements through Digital Amplification have recently eliminated this need. With Digital Amplifiers, the output is passed through Direct-digital synthesis (DDS) process then sent to the speakers. You don't hear "00110101" because the sound is synthesized to the speaker.

Speakers work by vibrating from an electrical signal source using frequency and amplitude. It matters not if that electrical signal was generated by an analog amplifier or a digital one. Those 0's and 1's from a digital amplifier are calculated into frequencies and amplitude that are sent to the speakers creating sound. One benefit of Digital amplification is that the process can now closely manage the power supply reducing the need for large input voltages, reducing the size of the heatsinks, the overall size of the amplifier and all while improving efficiency and sound quality.

For reference, I've linked a PDF that explains most of this process in greater detail: http://focus.ti.com/pdfs/vf/audio/prod_brochure.pd...


RE: Digital?
By JoshuaBuss on 11/29/2008 5:20:12 PM , Rating: 2
digital shouldn't have anything to do with tangibility, it simply means 'discrete' or 'not analog'.

"digital music" is a really bad term. if it was called "compressed music" it would be much more accurate for the majority of its uses.. and if it was called 'non-physical music' or 'non-physical medium' it'd be even more accurate.


Digital?
By traxsalty on 11/30/2008 5:55:02 AM , Rating: 2
Unfortunately, most people don't care about MP3 compression, Their ears care that this is the tune that they want to hear.
128kb/sec is "good enough" for the majority of people. Problem is, they can't understand why repeated listening gives them an aural headache, and then the tune starts to grate on them. I won't get into the "loudness wars".




RE: Digital?
By mindless1 on 11/30/2008 6:11:25 PM , Rating: 2
I'd have to disagree with that, most people do care but for a brief period delivery systems and storage capacities were limited enough that the ability to get music faster and store more music overrode the concern about degradation from excessive compression. Now our storage devices have multiple times the capacity, with small space, weight, and cost, making the sound quality rise in relative importance.


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