For the first time, revenue from music download/subscription sales has overtaken physical media in the first quarter of 2012. While individual song download sales have overtaken CD singles for many years, album sales including box sets continued to sell better than as downloads up until now. This is mainly due to the fact that consumers had no choice but to purchase the full album on physical media, where as music download stores allow customers to purchase individual songs from albums sold as downloads from most online shops.
The BPI (UK’s equivalent of RIAA) has pointed out that it will take a few more quarters to confirm whether or not this trend continues, especially during the final quarter where consumers traditionally buy physical box CD sets and music videos as gifts during the holiday season. In the first quarter, digital sales rose by 23.6% while physical media sales fell by 15.1% compared to the same quarter last year.
Unlike physical sales, music sales also includes subscription services where customers can download or stream an unlimited number of tracks, but lose access to this music once they cancel their subscription. However, income from music subscriptions only makes up roughly 10% of digital sales and subscription rates are only increasing by about 20% each year.
While most music download stores have long done away with DRM that limits what devices customers may enjoy their music on, music downloads still have several other drawbacks over physical sales. CD audio still has superiour audio quality than music sold on iTunes and as MP3s on other stores. There are also legal issues with selling digital downloads second hand, unlike selling off unwanted music CDs. The same goes with purchasing second hand music, as there are no “Used MP3s” shops either.