Video killed the radio star and now digital music is on the way to killing the record store.

Figures show that digital music has now overtaken physical music formats to be the top revenue source for rights owners, according to 2013 data from Recorded Music NZ.

Digital sales reached $27.9 million last year - $800,000 ahead of CDs and vinyl.

But the combined increase in downloads and streaming could not prevent an almost 10 per cent decline in revenue for the year to $55 million.


Recorded Music NZ chief executive Damian Vaughan says the industry is in a transition period.

"While our industry adapts and evolves, it's quite clear that in 2014 there are a multitude of ways to access and consume music - whether it is streaming, purchasing downloads or visiting the local record store," he said.

Locally produced music bucked the overall trend, with sales of digital singles and albums as well as physical albums lifting, and with the debut recording from opera trio Sol3 Mio beating Lorde's Pure Heroine to best-selling album.

Digital music had been great for Kiwi artists but the rise of streaming through sites such as Spotify over purchased downloads may not be, said Anthony Healey, director of NZ operations for the Australasian Performing Right Association, which represents songwriters and artists.

"The uptake of digital music technology had been of benefit to New Zealand musicians," he said.

"What we are now seeing is the a very rapid change in digital technology from downloads technology to streaming and the outlook for streaming revenue, whilst growing rapidly, may not be as beneficial to those that create music as digital downloads have been.

"Sites such as Spotify are almost cannibalising the digital revenue."

Mr Healey said the more music streamers consumed digitally, the less revenue was earned by lesser known artists.

- additional reporting AAP