Remember back in the 1990s, during the music industry’s peak, we’d get the frequent necessity to buy whole music albums at $20 to $25 a pop? The Spice Girls, Back Street Boys and N-Sync albums would be sold off the shelves, resulting in record-setting profit margins for artists and producers. We’d shell out heavy cash even when only one or two songs were interesting. There was something special about having the album cover and the printed lyrics for each song in the booklet. Yea, we don’t do that anymore. Physical CD sales are expected to drop another 40 percent next year to $2.7 billion, while digital music–mostly sold through iTunes–will make an estimated $2.8 billion. But this is not necessarily a net positive for the consumer. The entire music industry is expected to take a pretty substantial hit, dropping from $6.2 billion in overall 2010 sales to a humbler $5.5 billion next year. But here’s a newsflash; Digital music sales will overtake CD sales in the US for the first time in 2012, according to a new study released by Strategy Analytics. I know what you’re thinking, didn’t that already happen? Strange but true, CD sales are still the biggest moneymakers for the music industry. This is until next year, of course, when everything will change.

Strategy Analytics said in a new study that it expected CDs to continue dropping a steep 40 percent from $3.8 billion in revenue for 2010 to just $2.7 billion in 2012. Digital, led mostly by iTunes, would keep growing and just edge past the physical medium to hit $2.8 billion. Many attest this fall to the fact that online music sales weren’t growing as quickly as expected by the labels, leading to the overall market shrinking from $6.2 billion last year to $5.5 billion in 2012. The analyst firm still saw digital music growing but believed labels would still “struggle” as they faiuled to understand how to latch on to digital.

While downloading music nowadays seems more popular than going to the store and buying an album, both mediums have different revenue models, and the problem is digital music isn’t as profitable. Sure, digital offers more revenue streams, but when you buy a physical album, you’re paying $15 to $20 a pop. Digital downloaders, by contrast, tend to pick and chose the tracks they like. Instead of buying the entire album, they’ll fork over $2 to $3 for a few select songs. Put in plainer math, singles make up 39 percent of downloads, while albums are only 32 percent of the whole pie. (Music sold through subscriber services like Zune Pass and free, ad-sponsored tunes comprise the remaining 29 percent.)

That’s changed the way some record companies tabulate their sales. “We don’t focus anymore on total album sales or the sale of any one particular product as the metric of revenue or success,” Universal Music Group’s digital division executive vice president Rio Caraeff told the New York Times in 2008 (Caraeff’s now the president and CEO of VEVO). “We look at the total consolidated revenue from dozens of revenue lines behind a given artist or project, which include digital sales, the physical business, mobile sales, and licensing income.”

Apple’s iTunes policies meant that direct downloads would still rule by 2015, with singles making up 39 percent of digital music, and 32 percent representing albums. Subscriptions like Rhapsody or the Zune Pass would still be the minority at 14 percent, while an upcoming Spotify US launch and other possible deals would carve out another 14 percent for free, ad-sponsored music. Labels had to consider subscriptions and other unlimited approaches if they hoped to see revenue grow, Strategy Analytics said.

Curiously, the same article quotes an analyst who claims that digital music revenue will never replace the money generated by CD sales–not even by 2013. For the most part, though, the article shows that even three years ago, the industry saw the writing on the wall; digital sales would be their only way out of the music-buying slump. But we can all agree that a lot has changed since the tape deck and Bone Thugs and Harmony days of the 1990s.