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All Things Must Pass. Maybe.

Atari has filed for bankruptcy in the USA. The filing was not nearly as surprising as the realization that the company, a pioneer in arcade-style video games, is actually still in business in 2013. Atari is not alone. The downward arc of the personal computer technology cycle is bringing about exits by several former industry leaders. Is there a lesson here for the fate of music formats?

Leading PC maker Dell has been taken private, its future direction uncertain as the company tries to re-invent itself. Intel — whose eponymous ‘Intel Inside’ ad campaign created consumer demand for branded CPUs where none existed — announced it was phasing out manufacture of branded desktop motherboards. HP CEO Meg Whitman, whose company’s stranglehold on the business of printing on paper did not lead to innovations in 3D printing, said in an interview, “We’ve ultimately got to be in the smartphone business.”

No technology remains dominant forever. Neither does any music delivery format. Jan Koltai published an extraordinary graphic summarizing the four technology cycles in the music industry 1975-2007. (See below.)

  • Vinyl record sales peaked in 1976 at $344 Million, trending down to near-zero by 1991.
  • Cassettes peaked in 1988 at $450 Million, with demand bottoming out in 2004.
  • CDs peaked in 2007 at $942 Million and are on a steep downward trajectory, falling another 13.5% in 2012.
  • Digital downloads are still on the rise, up 9.1% to a new high in 2012, but are threatened by the growing popularity of streaming audio services.

While technologies fade, they seldom go away completely. Atari’s backruptcy filing is intended to shield its US operations from the financial woes of French parent company Atari S. A., so that its assets can be sold to continue a now-profitable line of Android and iOS games. The resurgence of vinyl is well-documented, with double-digit annual sales growth in each of the last five years (though vinyl still represented only 2.4% of physical album sales in 2012). Cassette singles still have a following in the UK, while sales of pre-recorded cassettes fuel the growth of the music industry in Africa. And high-tech Japan is the last developed country still firmly wedded to a pre-Internet relic — the fax machine.

What goes around.

[About the author. Consumer Electronics and Software industry veteran Tom Dennehy publishes the online journal Surface to Air, triangulating among ideas and events at the intersection of the physical music past and the weightless digital future. Follow him on Twitter @InAurem_a2d.]

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