According to a new NPD MusicWatch Survey, and first discussed on ArsTechnica, Apple has for the first time beaten Wal-Mart to become the nation’s largest music retailer by capturing 19 percent of the music retail market in January 2008. Wal-mart came in second with 15 percent market share.

The day when digital downloads would exceed physical media purchases has long been expected. For the deafest of deaf in the music business, the proof is finally in the pudding. The CD is dead. The nightmare is real.

How real is it? For one, digital music buyers buy tracks while CD buyers have to pay for the whole thing. The result: fewer tracks sold and less money made. That goes a long way towards explaining the 10 percent decline in music spending in 2007. According to NPD’s research, 48 percent of US teens didn’t buy a single CD in 2007.

Now that’s real.

It’s enough to make you think Flo-Rida and T-Pain were talking about music profits when they sang, “shorty got low, low, low, low, low, low, low, low”.

January’s Digital Music Forum: East revealed a new enlightenment among the music establishment. DRM was being tossed by the wayside, new models based on accessibility and meeting the customer’s needs were being discussed. It was if the music industry was creative again.

Just the other day the Times Online reported that Warner, EMI and others were talking with ISPs and mobile phone providers to supply their entire catalog on a subscription basis. The two sticking points for the majors: their percentage of the revenue split and their insistence on shackling the consumer with DRM music. This would prevent music from playing in all players (such as iPods) and would also lock a customer out of their music once their subscription had ended.

These old tactics only prove that the elegant solution has yet to reveal itself. In that, Apple can take some satisfaction. Reports are that they too are in talks with the majors for an all-you-can eat approach. Until that’s all sorted out, Apple can enjoy doing what nobody else can do: outsell Wal-Mart.