Just over half of Atlantic Records’ music sales came from digital in Q3, making the Warner Music Group (NYSE: WMG) label the first to see MP3s outpace CDs, NYT reports.  But that noteworthy milestone is set against the problem of shrinking music sales and the inability of digital sales to replace the lost revenues associated with physical discs. Citing a study from Forrester Research, domestic recorded music revenues will fall 8.9 percent to $9.2 billion in 2013 from $10.1 billion this year. Sales were $14.6 billion eight years ago, according to the Recording Industry Association of America.

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So far, record companies are trying to grow revenues by expanding their reach in concert tours and artist merchandising deals. Labels are also spending less money on marketing their artists. As for wringing dollars out of digital, Atlantic has been particularly aggressive about selling ringtones and ringbacks, tapping satellite radio, while also relying on iTunes and the burgeoning popularity of subscription services. Atlantic’s focus on those areas helped parent WMG post a 28 percent rise in Q3 digital revs.

Photo Credit: Jason Mraz by macinate