U.S. Music Industry's Revenue Growth Accelerates as Paid Streaming Subscriptions

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The average number of paid subscribers to services like Spotify, Apple Music and Tidal over the period ballooned to 30.4 million in the first half of 2016.

In what's now become a familiar story, the U.S. recorded music industry has seen revenue growth accelerate again in the first half of 2017, up 17 percent over the first half of last year to $4.0 billion, according the the RIAA's 2017 mid-year report. That's more than double the percent increase the RIAA reported at this time last year, when the industry was up 8.1 percent over the first half of 2015 to $3.43 billion.

And once again, the main driver of that growth is streaming — more specifically, paid streaming subscriptions. The average number of paid subscribers to services like Spotify, Apple Music and Tidal over the period ballooned to 30.4 million, up 50 percent from the 20.2 million in the first half of 2016. That's both a record high for the U.S. and a growth of 1 million new subscriptions per month over the prior year, noted RIAA senior vp strategic data analysis Josh Friedlander.

Overall, total digital revenue accounted for $3.2 billion — or 84 percent of the total industry value — an increase of 21 percent over the first half of 2016 and $1 billion more than digital raked in as recently as 2013. Of the total $4.0 billion market, 62 percent of revenue came from streaming ($2.5 billion, up 48 percent); 19 percent from digital downloads ($757 million, down 24 percent); 16 percent from physical ($632 million, down one percent) and three percent from synch revenue.

Within that $2.5 billion of streaming revenue lies one of the RIAA's most contentious issues: the gap in revenue between paid subscription streaming services, like Apple Music and Spotify premium, and ad-supported on-demand services, like YouTube and Spotify's free tier. Paid on-demand subscription revenue on its own was $1.7 billion, up 61 percent from the same period in 2016 and itself representing 43 percent of the total value of the U.S. music industry, dwarfing digital download and physical revenue combined.

By comparison, ad-supported on-demand streaming accounted for $272 million, up 37 percent over the first half of 2016 and just seven percent of total revenue — despite an estimated 140 billion streams over that period, a figure that the RIAA characterizes as understated, due to unreported YouTube streams. Revenue from digital and customized radio (Pandora, SiriusXM, etc.) was up 21 percent to $493 million. 

"To the fan, there is often little difference between the multitudes of services available, yet the payouts to creators are very different and vastly impacted by outdated or abused laws and regulations," said outgoing RIAA chairman/CEO Cary Sherman in a statement accompanying the release. (As an extra-pointed dig, Sherman also said that it takes 58 hours of watching a music video on YouTube for creators to get paid $1, though this is based on worldwide data from MiDia Research and Manatt, Phelps and Phillips rather than the RIAA's own U.S. findings.) "That’s why a united music community continues to be incredibly animated about music’s 'value gap' and calls upon policymakers — and our business partners — across the globe to do better and address these inequities."

In his statement, Sherman also noted that the RIAA estimates that between on-demand audio/video and digital radio, there could be as many as 1 trillion streams generated by the end of 2017, after 460 billion were racked up in the first half of the year so far. "The pace of change embraced by record labels is staggering," Sherman noted. "Just two years ago, digital downloads was the largest format, and streaming was only beginning to take hold. Fast forward a few short years and the business is already dramatically different."

Within digital downloads, both track sales revenue (down 23 percent) and digital album sale revenue (down 26 percent) fell off significantly; as Sherman said, after accounting for the largest section of revenue as recently as two years ago, the digital downloads sector is now half as big as it was in the first half of 2013, when it accounted for $1.5 billion in revenue.

While physical revenue also fell once again, it represented just a modest decline, comparatively speaking. CD sales dropped three percent to $431 million, while vinyl was up three percent to $182 million, and now represents 29 percent of all physical sales revenue, its highest share of the sector since the mid-1980s, the report says. While its growth is slowing, the format is still gaining, long after many claimed it had peaked.

This article originally appeared on Billboard.com.

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