Thanks, Spotify: Subscription Services Deliver Real Money to Music Industry

But total revenue is still well short of where it was in the ’90s

Last Updated: September 20, 2017 @ 12:22 PM

Streaming subscriptions services like Spotify, Tidal Music and Apple Music have helped the industry boost consumer sales by 17 percent through the first half of 2017, according to a new report from the Recording Industry Association of America.

That year-over-year change reflects a massive shift from physical CD sales. Streaming revenue made up 62 percent of the music market during the period, with digital downloads comprising 19 percent and physical sales 16 percent. That’s a significant change from just the first half of 2015, when one-third of music revenue came from streaming. The RIAA’s streaming category includes paid services like Tidal and Apple Music and ad-supported products like YouTube and Vevo. Spotify, one of the largest streaming players, offers paid and ad-supported services.

“Record labels continue to do their part, embracing new business models, partnering with more than 400 services worldwide to deliver music to fans instantaneously at the touch of a fingertip,” RIAA Chairman and CEO Cary Sherman said in a Medium post accompanying the study. “The pace of change embraced by record labels is staggering. Just two years ago, digital downloads was the largest format, and streaming was only beginning to take hold. Fast forward a few short years, and the business is already dramatically different.”

Despite a 48 percent surge in streaming revenue from the same period last year, the industry still faces challenges, Sherman said in the post. Total revenue for the industry is still far below its levels of the late 1990s.

And all streaming is not created equal: subscription services make up 44 percent of total industry revenues, while ad-supported music contributes just 7 percent. Subscription streaming contributed $1.7 billion through the first half of the year, while digital radio delivered $493 million and ad-supported on-demand streaming brought in $273 million.

“To the fan, there is often little difference between the multitudes of services available, yet the payouts to creators are very different and vastly impacted by outdated or abused laws and regulations,” Sherman wrote. “And that’s why a united music community continues to be incredibly animated about music’s ‘value gap’ and calls upon policymakers  –  and our business partners  —  across the globe to do better and address these inequities.”