Universal Music Group nearing its digital tipping point

Gigaom

For the world’s biggest music label, the days of revenue decline are over — and soon, it will be surviving mostly on digital money.

Universal Music Group, home to Lady Gaga and U2, on Tuesday reported that revenue for the last nine months had risen 2.1 percent over the last year.

Sales from CDs dipped again by 14.2 percent to €1.02 billion ($1.29 billion) while digital grew another 8.6 percent to €916 million ($1.16 billion) — poised to overtake physical sales soon.

UMG is not the first label to reach this tipping point. Warner Music Group has seen the same pattern as digital music sales grow and CD sales shrink ever more.

In truth, however, Universal is breathing fumes on the way to the milestone. Which is to say, revenue is only up 2.1 percent thanks to currency fluctuations. Had currencies remained constant, company sales would have dipped by 3.4 percent.

The other story is that, regardless of format, recorded music revenue continues to shrink because digital downloads are cheaper than discs. The growth is being picked up by licensing to other services.

Even so, it remains true to say that the worse days of the music business are bottoming out.

UMG added that it is now integrating teams from EMI Recorded Music, which it has acquired, and has attracted “robust interest” from potential bidders for several EMI imprints, which it has been forced to sell by the European Commission to satisfy antitrust concerns around the deal.

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