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Streaming Helps Music Industry Rebound in 2016 After Years of Decline

 

The outbreak of streaming has officially helped the music industry rebound after nearly a decade of decline, with the Recording Industry Association of America reporting $7.7 billion in revenue in 2016. That’s the music industry’s highest gross since 2009 and, at an 11 percent improvement over 2015, its best gains percentage-wise since 1998.

For the first time, streaming was the biggest revenue generator for the music industry, overtaking digital downloads and physical sales combined. In total, streaming accounted for $3.9 billion – or 51 percent – of the music industry’s $7.7 billion haul, the New York Times reports.

The chief catalyst for the revitalization was the increase in paid music streaming service subscribers: 22.6 million users now subscribe to services like Apple Music, Spotify and Tidal, nearly doubling the number of subscribers in 2015. As a result, the music industry netted $2.3 billion from streaming subscribers, also doubling last year’s total.

In a blog post that accompanied the RIAA’s report, the organization’s CEO and chairman Cary Sherman noted that 2016’s revenues would have likely been better if not for YouTube, who he accused of paying too little in royalties.

“It makes no sense that it takes a thousand on-demand streams of a song for creators to earn $1 on YouTube, while services like Apple and Spotify pay creators $7 or more for those same streams,” Sherman wrote.

“Why does this happen? Because a platform like YouTube wrongly exploits legal loopholes to pay creators at rates well below the true value of music while other digital services — including many new and small innovators — cannot. It may be the same song requested by the user, on the same device, but the payouts differ enormously because of an unfair and out-of-date legal regime.”

While streaming has returned the music industry to somewhat prosperity, it wasn’t all good news: Compact disc sales continue to plummet, with only 99.4 million physical albums purchased in 2016. That total marks the first time since 1986 that less than 100 million CDs were sold in one year.

On the flip side, vinyl sales increased slightly to bring in $430 million, with a quarter of all physical music sales now coming from vinyl, the highest percentage since 1985, Pitchfork reports.

With the surge in streaming, digital downloads also took an expected hit, sliding 22 percent from its 2015 total and netting $1.8 billion for the music industry.

“As excited as we are about our growth in 2016, our recovery is fragile and fraught with risk. The marketplace is still evolving, and we’ve experienced unexpected turns too many times before,” Sherman added.

“Moreover, two of the three pillars of the business  —  CDs and downloads  —  are declining rapidly. It remains to be seen whether growth of the remaining pillar will be sufficient to offset the losses from the other two. Much rides on a streaming market that must fairly recognize the enormous value of music.”

However, even as the music industry climbed to $7.7 billion in revenues, that’s still just half of the nearly $15 billion they raked in at its peak in 1999, a year before Napster forever reshaped music’s digital landscape.

“A year of growth in the U.S. music business is welcome news,” Sherman concluded. “It suggests that years of patiently nurturing a nascent streaming marketplace has begun to pay off. But it does not erase 15 years of declines, or continuing uncertainty about the future.”

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