CD sales may be declining worldwide, but a prominent US distributor and wholesaler of physical music media says its CD sales have increased year-on-year, thanks to the popularity of K-pop and Taylor Swift.
Florida-headquartered Alliance Entertainment said its compact disc sales grew 3.2% YoY in the first half of 2024, thanks to increased demand for K-pop and “sales from megastars,” including Taylor Swift. Alliance said the pop star’s new album, The Tortured Poets Department, sold 1.1 million CDs in its first week.
The company’s CD sales totaled USD $130.0 million in fiscal year 2024, which ended on June 30, 2024. That compares with sales of $128.0 million in the prior fiscal year.
“Demand for physical music, particularly vinyl and CD sales, remains strong, and we are excited about major upcoming releases and opportunities in this space,” Alliance CEO Jeff Walker said.
The jump in CD sales bucks a long-running trend that has seen vinyl overtake CDs in recent years, for the first time since the 1980s. CDs have been declining amid a consumer shift to music streaming, while vinyl records have seen a resurgence as a type of music collectible.
According to data from the RIAA, total CD sales in the US fell to 37.0 million in 2023, down from 37.7 million the year before.
However, vinyl unit sales grew to 43.2 million in 2023, up from 40.5 million the year before.
Alliance Entertainment’s vinyl sales grew by 1.6% YoY in fiscal 2024, reaching $329.3 million. Vinyl now accounts for 30% of the company’s sales, up from 20% four years earlier.
The company reported total revenue of $1.16 billion in fiscal 2024, down 5% from the previous year.
Nonetheless, the company’s revenue remains well above what it was before what it calls a “Covid spike” in FY 2021 and 2022. In fiscal 2020, the company reported $776 million in revenue.
Source: Alliance Entertainment
Despite the decline,, the company improved its gross profit and adjusted EBITDA, thanks to efficiencies.
Gross profit reached $128.9 million in FY 2024, up 24% YoY, while the gross profit margin improved to 11.4%, compared to 9% the year before.
Adjusted EBITDA came in at $24.3 million, versus an adjusted EBITDA loss of $17.6 million the year before.
Source: Alliance Entertainment
“Throughout fiscal 2024, we focused on executing our operational strategies to drive profitability and efficiency, and the results speak for themselves,” Walker said.
He added that Alliance’s “emphasis on cost control and margin enhancement” demonstrated the company’s “ability to extract value from our revenue streams and adapt to evolving market dynamics without sacrificing operational strength.”
Cost efficiencies were achieved “particularly through warehouse automation and the strategic reduction of non-essential expenditures,” Walker said.
Besides physical music, Alliance also sells physical video (BluRay, DVD, UltraHD), physical video games, and toys and collectibles.
“In our gaming segment, we more than doubled the average selling price, particularly in hardware and retro arcade products. Our strategic shift toward higher-value offerings is proving successful, and we expect to benefit from new hardware releases in the coming year. Similarly, in consumer products, we improved margins and pricing, demonstrating the effectiveness of our inventory rationalization efforts,” Walker said.
The company recorded a 9.2% YoY increase in sales of BluRay, DVD and UltraHD media, to $207.4 million, while video game sales fell 13.6% YoY, to $338.1 million, accounting for much of the company’s total revenue decline.
Credit: Alliance
“Throughout fiscal 2024, we focused on executing our operational strategies to drive profitability and efficiency, and the results speak for themselves.”
Jeff Walker, Alliance Entertainment
“Looking ahead, with new gaming hardware releases on the horizon and the collectibles market showing stability, we are confident in our ability to capture future demand and continue enhancing profitability as we move into fiscal 2025 and beyond,” Alliance Chairman Bruce Ogilvie said.
The company has also been expanding from wholesaling into retailing, and its direct-to-consumer segment accounted for 36% of gross revenue in FY 2024, up from 31% the year before.
Alliance Entertainment went public last year via a SPAC acquisition that saw the company listed on the NASDAQ. After a shaky start, the company’s stock price has been growing in recent months.
It closed at $2.49 a share on Tuesday (September 24), more than double its price a year earlier, and up nearly 168% since the start of the calendar year.Music Business Worldwide
