Music Streaming Up 42 Percent While Digital Downloads Fall

Streaming is the new face of digital music consumption, according to Nielsen’s 2014 Mid-Year Music Industry Report. In the U.S., on-demand streaming was up 42 percent from last year with over 70 billion songs (audio and video) streamed in the first half of 2014. Digital track downloads fell 13 percent to 593.6 million, compared with 682.2 million last year. The entire music industry’s sales, including albums, streaming, and downloads, dropped 3.3 percent.

musicGrowth in the music industry also comes from a rise in sales in an old medium: vinyl records. Vinyl sales are up 40 percent to 4 million units. The 62.9 million CD album sales, meanwhile, are still leading vinyl sales, but CD album sales experienced a 19.6 percent drop this year.

Many companies, including established tech giants, are vying for a top spot in the new digital music market. Apple, which ruled digital downloads with its iTunes platform, bought Beats Music in May for $3 billion to gradually transition its business model to streaming. Google bolstered its Google Music All-Access streaming service by buying the playlist app Songza. Amazon just launched an on-demand service, Prime Music. YouTube, which is already a popular platform for music video streaming supported by ads, is also expected to launch an on-demand music streaming service without ads.

Spotify is rapidly becoming a major player in the digital music industry. Spotify has made over 500 million dollars, and acquired the data provider EchoNest earlier this year. The company is hoping to expand to integrate Spotify music into third-party apps. TechCrunch predicts, “Becoming the legal backbone of music streaming in tons of apps could make its subscription more attractive to users, and I see developing an ecosystem of niche music apps around it as a high-potential way to fight the platform owners.”

Pandora and SoundCloud, however, may have some challenges in the new frontier of digital streaming. Pandora doesn’t have on-demand song play, and the personalized radio station is no longer unique to Pandora. Spotify’s ad-supported version and iTunes Radio offer similar radio options. SoundCloud is trying to incorporate ads, but after a crackdown on unlicensed streaming, the company is still struggling to perfect its product.

Internationally, the music scene is a little different. Digital downloads may not be completely extinct just yet. While digital download service iTunes is available in more than 83 countries, streaming services are often not available.