Surprise, surprise, the music industry continued to see physical album sales plummet in 2008 and digital downloads soar. And even the continued re-emergence of vinyl sales (a small, but not insignificant number).

In numbers released by The Nielsen Co. (via the AP) this week, digital track sales from online stores like iTunes and Amazon MP3, broke a billion for the first time, at 1.07 billion for the year, up 27 percent from last year. And digital album sales improved 32 percent, to 65.8 million.

At the same time, physical album sales dropped from 450 million to 362 million year over year, a whopping 20 percent.

Are people still buy lots of music? Sure, and that’s the positive for the industry—overall music sales were actually up 10.5 percent on the whole in 2008, to 1.5 billion, but as you can see the bulk of that’s from digital.

People are just buying in different ways, and we’ve known that for years now, as we’ve seen Apple rise to be the top music seller in the U.S. Research firms such as Gartner say the industry should embrace it and work hard on shifting even more heavily to this sales model.

One interesting note in Nielsen’s figures is that vinyl continues to pick up the pace as well. It may be miniscule compared with digital downloads, but 1.88 million units of vinyl were sold last year—more than in any year since Nielsen SoundScan began keeping track in 1991. And among the top three, the Beatles’ Abbey Road ranked second in purchases, between Radiohead’s In Rainbows and Guns ‘n Roses’ Chinese Democracy. Sounds like audiophiles young and old are still enjoying music the uncompressed way.

Arlen Schweiger - Editor of Electronic House Magazine

Arlen writes about home technology installations and product news and reviews for electronichouse.com and Electronic House magazine.