It’s been more than a decade since Napster sent the music industry into a
tailspin, and record labels are still adapting to the digital reality they find themselves in.

For better or worse, the future of music is not the CD, and a huge recent milestone confirms what we have known for a long time: that it’s largely digital.

According to Nielsen and Billboard’s 2011 Music Industry Report, digital
music sales surpassed physical music sales for the first time ever in
2011. All told, 1.27bn digital tracks were sold last year, accounting
for 50.3% of all music sales.

That’s a welcome 8.4% jump from 2010. Even more welcome: growth isn’t
just being seen in the sale of digital singles; according to Nielsen and
Billboard, one in three album purchases were digital in 2011. Four
years ago, just 5.5% of album sales were digital.

Genres benefitting the most from consumer demand for digital albums are
rap, electronica, R&B and Latin. All saw 20% plus growth last year,
with rap and electronica digital album sales rising an impressive 42%.

So is it time to declare the music industry’s worst days behind it?

That remains to be seen. 2011 saw an album (Adele’s 21) move more than
5m units,  the first time an album has achieved 5m in sales since 2004.
But the growth in album sales doesn’t mean that selling music (as
opposed to concert tickets and merchandise) will net the same profit
that it once did.

That really shouldn’t matter to record labels, of course. Markets
change, and reminiscing about much money you were making 20 years ago is
not nearly as productive as maximizing how much you’re making now.

From this perspective, the music industry should focus less on what it
can’t control, like piracy at the consumer level, and more on what it
can control, like pricing, distribution and supporting quality customer
experiences, particularly on digital platforms.