Streaming Services May Revive Falling Music Industry Revenue

Worldwide recorded-music revenue fell below $15 billion in 2014 for the first time in years, but the growth of streaming music services may have helped slow the decline, according to a new report from the International Federation of the Phonographic Industry. For the first time, digital music sales exceeded CD sales. Revenue from streaming services rose 39 percent, and if the trend continues, the music industry might start to see a rise in revenue as early as next year.

musicWorldwide music sales have plummeted dramatically since people stopped buying albums. Digital revenue grew 7 percent last year to $6.85 billion, edging out CD sales’ $6.82 billion. CDs remain popular in certain countries like Japan, where CDs account for 78 percent of the market share. While digital revenue is up as a whole, downloads declined 8 percent, according to The Wall Street Journal.

The declines in CD and download sales were probably prompted by the rise of streaming music services. Subscription services generate over $1.5 billion, almost a quarter of total digital revenue. Meanwhile, ad-supported services like Spotify’s highly criticized freemium model only make about 9 percent of digital revenue.

Interestingly, YouTube, another ad-supported platform for streaming music, is actually one of the most common ways to consume music. According to Bloomberg, 57 percent percent of Internet users reported they use YouTube to stream music, while only 38 percent use a streaming site and 26 percent use a download service like iTunes.

Despite the disappointing CD and download sales, the rise of streaming services is encouraging. Music record sales peaked at $38.7 billion in 2000, but with current estimates for the adoption of streaming services, the music industry could be making much more than that.

“Streaming subscriptions cost roughly $120 a year, which is more than the average consumer spent on music even back in the industry’s heyday,” notes Quartz. There is also a higher profit margin on digital sales because of the lower distribution costs.