Streaming Made Up One-Fifth of U.S. Recorded Music Revenue in 2013

Revenue is even, but streaming is up, as Spotify and Pandora royalty payments make up for declines elsewhere.

Streaming music revenue in the U.S. grew 39 percent in 2013, generating $1.4 billion in revenue and making up more than one-fifth of the recorded music industry's business, up from just 15 percent in 2012, according to figures released today by the Recording Industry Association of America.

In total, the U.S. recorded music industry posted $6.996 billion in revenue for 2013, down 0.3 percent from $7.016 billion in 2012, as royalty payments from music services such as Spotify and Pandora made up for declines elsewhere, according to the RIAA's annual report.

Sales from CDs, vinyl and other physical formats dropped 12.3 percent to $2.27 billion last year, while revenue from digital sources grew 7.6 percent last year to $4.36 billion. Last year, digital made up 64 percent of overall recorded music revenue.

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Within digital, however, a 1.0 percent decline in revenue from downloads to $2.8 billion in 2013 suggests that consumers may be shifting away from owning music towards streaming services that give them access to large catalogs of music, such as Spotify, Beats Music, Slacker and Rdio. RIAA estimated that 6.1 million people paid for on-demand streaming in 2013, nearly double that of 2012, when 3.4 million people paid for music subscriptions. Paid subscriptions generated $628.1 million in revenue in 2013, up 57 percent from 2012.

Advertising-supported streaming, such as YouTube and Spotify's free tier, generated $220 million last year, up 28.7 percent from 2012. In addition, Internet radio royalties paid out by SoundExchange to artists and rights holders were $590.4 million last year, up 27.8 percent. SoundExchange payments made up 8 percent of total U.S. music revenue in 2013, up from 6.7 percent in 2012. The majority of payments collected by SoundExchange come from Pandora, the country's largest Internet radio service.

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"All of this shows the music industry today has grown into a diverse digital business teeming with a wide variety of innovative services catering to all types of music fans," concluded Joshua Friedlander, RIAA's vp strategic data analysis.