Streaming Now Makes Up 83 Percent of Total Music Revenue

In its year-end report, the Recording Industry Association of America (RIAA) stated that, in the U.S., recorded music revenues grew 9.2 percent to $12.2 billion at estimated retail value, the fifth consecutive year of growth. Paid subscription services, ad-supported on-demand platforms and digital radio added $10.1 billion in revenue, a 13.4 percent jump. Paid subscriptions to on-demand services such as Apple Music and Spotify represented the majority of recorded music revenue, growing 14.6 percent to $7 billion in 2020.

Variety reports that, “also contributing to the surge are additional monies coming from first-time licensees (like Facebook and Peloton).” On-demand services experienced growth in subscriptions, from 60.4 million in 2019 to 75.5 million in 2020, “marking its biggest-ever increase in a single year.” RIAA revealed that, “overall, streaming accounts for 83 percent of total revenues.”

Last year was also notable for being the first time since 1986 that sales of vinyl surpassed all other physical products, with a growth of 29 percent equaling $626 million. Meanwhile, CDs “dropped 23 percent to $483 million, continuing the format’s decline.”

RIAA chair and chief executive Mitch Glazier noted that, “the most recent comprehensive data describes an industry contributing more than $170 billion in GDP to the U.S. economy each year and supporting near 2.5 million jobs nationwide.” “Those pre-COVID-19 numbers remind us just how bound up recovery is with getting music venues, touring, and live performances back on their feet,” he added.

Rolling Stone reports the RIAA added that, “CDs still outsell vinyl by about 8.7 million units.” In addition to dropping sales of CDs, “digital downloads continued to drop as well, down 18 percent to $674 million last year.”

Forbes observes that, “the streaming revenue model doesn’t serve artists, particularly those in the independent sector.” For 1 million plays of a song, artists receive about $5,000 from Amazon Music; $5,000-$5,500 from Apple Music; $12,000 from Google Play; $1,400 from Pandora; $1,700 from YouTube; and between $3,000-$6,000 from Spotify, which has 36+ percent share of the market with 286 million monthly active users. “That’s an average of 4.5 cents per stream,” it notes.

SoundCloud, however, is introducing a potentially game changing new revenue model with “fan-powered” royalties that delivers “money the service makes from listeners directly to the musicians they listen to.” The conventional model pools royalties, which are then paid out to artists “based on their share of total streams.”

SoundCloud’s proposed system does, however, take into account whether the fan is a paying subscriber and how many ads he has consumed. “Many in the industry have wanted this for years,” said SoundCloud chief executive Michael Weissman.