US music industry body the RIAA has published its figures for 2015, revealing that recorded-music revenues rose by 0.9% last year to $7bn.
That’s estimated retail value: the amount of money people spent on physical music, downloads and streams. The wholesale value – the money flowing back to rightsholders – rose 0.8% to $4.95bn.
Another key point from the RIAA’s announcement: streaming is now the biggest chunk of US recorded-music revenues, rising from 27% in 2014 to 34% in 2015 – overtaking download sales in the process.
Streaming revenues were up 29% to $2.4bn in 2015. Download sales fell from $2.58bn in 2014 to $2.33bn in 2015 – a 9.6% decline. Meanwhile, physical sales fell by 10.1% to $1.9bn last year.
A big positive story from the figures is the growth of paid subscriptions to streaming services in the US. Revenues from streaming subscriptions rose by 52% from $800m in 2014 to $1.22bn in 2015.
“In 2015, digital music subscription services reached new all-time highs, generating more than $1bn in revenues for the first time, and averaging nearly 11 million paid subscriptions for the year,” wrote RIAA boss Cary Sherman in a blog post.
“Heading into 2016, the number of subscriptions swelled even higher — more than 13 million by the end of December — holding great promise for this year.”
There’s rounding going on here: the number of paid subscriptions in the US have risen from 3.4m in 2012 to 6.2m in 2013, 7.7m in 2014 and 10.8m in 2015, and as Sherman made clear, these are averages for the year, not year-end totals.
(An interesting stat: in 2013, the annual revenue per average streaming subscriber was $103. In 2014 it was just under $104. But in 2015, it was nearly $113.)
Source: RIAA
Other components in the US streaming sector included SoundExchange distributions – which rose from $773m in 2014 to $803m in 2015 – and income from on-demand ad-supported streams, which rose from $295m to $385m.
The latter area is proving controversial in the US, just as it is elsewhere in the world. In fact, Sherman adopted the same language as IFPI boss Frances Moore in lamenting the “value gap” between ad-funded streaming consumption, and the revenues flowing back to rightsholders and musicians.
“The consumption of music is skyrocketing, but revenues for creators have not kept pace,” wrote Sherman.
“In 2015, fans listened to hundreds of billions of audio and video music streams through on-demand ad-supported digital services like YouTube, but revenues from such services have been meagre — far less than other kinds of music services. And the problem is getting worse.”
The RIAA has called this out with a graph showing how the number of ad-supported streams grew by 63% in the US in 2014, but revenues from those streams rose by just 34%. That gap widened in 2015: streams were up 101%, but the revenues they generated grew by just 31%.
Source: RIAA
“This is why we, and so many of our music community brethren, feel that some technology giants have been enriching themselves at the expense of the people who actually create the music,” wrote Sherman.
“Some companies take advantage of outdated, market-distorting government rules and regulations to either pay below fair-market rates, or avoid paying for that music altogether.”
YouTube, right? Well, not just YouTube. In fact, the RIAA is training its sights on radio broadcasters as well as Google’s online video service, as the RIAA gears up for the latest round of its lobbying efforts over royalties.
“These unjustifiable inequities (really, special-interest favours) include: the exemption AM/FM broadcasters enjoy from having to pay artists and labels for the music they play, satellite radio’s unfair and inexplicable below-market rate standard, and the hopelessly outdated ‘notice and takedown’ provisions of the Digital Millennium Copyright Act (DMCA), which many services have distorted to rake in billions of dollars of revenue on the backs of artists, songwriters and labels.”
Last year, BPI CEO Geoff Taylor criticised YouTube via a factnugget claiming vinyl sales were more lucrative for the British music industry than YouTube streams. The RIAA is making exactly the same point now about ad-funded on-demand music more generally, but with figures from 2015.
“Last year, 17 million vinyl albums, a legacy format enjoying a bit of a resurgence, generated more revenues than billions and billions of on-demand free streams: $416 million compared to $385 million for on-demand free streams,” wrote Sherman.
(Our caveat: these are revenues, not profit. A comparison of the costs of producing vinyl and the costs of distribution through ad-supported streaming services are a topic for a separate article in itself.)
Source: RIAA
With Spotify arguing that its free tier is an essential funnel to convert its listeners into paying subscribers, and YouTube still getting going with its YouTube Red subscription tier, addressing this value gap is a sensitive issue for the industry.
It’s interesting (well, it is to us) that neither the RIAA’s official announcement nor Sherman’s additional commentary mentioned piracy at all. In 2016, YouTube, ad-supported on-demand streams and the value gap are the new bête noire for a growing number of rightsholders.
Piracy, despite the RIAA’s success in squashing Aurous shortly after its launch last year, has receded as a villain.
Even so, the broader picture from the RIAA stats is still one of optimism. Here’s how the body’s SVP of strategic data analysis, Joshua Friedlander, put it in the announcement:
“While overall revenue levels were only up slightly, large shifts continued to occur under the surface as streaming continued to increase its market share,” he wrote.
“In 2015, the industry had the most balanced revenue mix in recent history, with just about one third of revenues coming from each of the major platform categories: streaming, permanent downloads, and physical sales.”
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