Streaming Music Revenue Surpasses Other Formats For The First Time Ever

Image courtesy of Phillippe Put

Digital music has come a long way: Once feared as the poison arrow that would take down the recording industry, streaming music is now making more money for recording companies than any other format.

Subscription music services generated the majority of revenue for recording companies last year, in a first for the industry: They accounted for more than 51% of the industry’s revenue, in comparison to 34% in 2015, according to a report [PDF] from the Recording Industry Association of America.

Overall music revenues went up by more than 11% in the U.S. in 2106 RIAA says, after growing by barely 1% in 2015.

Though $7.7 billion in total sales sounds like a hefty number, it’s only about half what the industry pulled in during its pre-Napster heyday in 1999, points out The Wall Street Journal.

Of course, subscription services are a lot different than simply swiping an mp3 off the Internet — we call that piracy — because they have more than 22 million subscribers in the U.S. who are paying for the right to stream music.

It’s not all streaming puppies and rainbows, however, as RIAA chairman and chief executive Cary Sherman warned in a blog post that despite the boost in sales in 2016, things could still take a downward turn.

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

To that end, CD sales declined 21%, and digital downloads also took a steep dive, dipping 22%. Streaming sales first beat out digital downloads back in 2015, the same year that Warner Music said it was making more money from streaming than any other source. Streaming sales have been beating CD revenue since 2015 as well.

But Sherman goes on to say that the “unfortunate reality” is that the industry has achieved success “in spite” of current music licensing and copyright laws, not because of them. He takes aim specifically at YouTube, noting 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.”

He accuses YouTube of “wrongly” exploiting loopholes to pay creators at rates “well below the true value of music” while other digital services can’t do that.

We’ve reached out to YouTube for comment on Sherman’s remarks, and will update this post if we hear back.