US industry body the RIAA has published its figures for music sales in the first half of 2016, and they tell a positive story: an 8.1% year-in-year rise in revenues.
“For the first half of 2016, strong growth in revenues from subscription streaming services more than offset declines in unit based sales of physical and digital music download products,” explained the RIAA in its mid-year report.
“Overall revenues at retail increased 8.1% on a year-over-year basis to $3.4 billion, the strongest industry growth since the late 1990’s. At wholesale, value increased 5.7% to $2.4 billion.”
This growth is presenting the RIAA and other industry bodies with a challenge: how can they convince regulators and politicians that the “value gap” between ad-supported streams (particularly on YouTube) and the revenues they generate for the industry is harmful, if the overall business is on the up again?
RIAA boss Cary Sherman is diving into that challenge with no hesitation. “Despite the massive consumer demand for music, the damning reality remains that music is fundamentally undervalued, with broken, outdated laws threatening the entire music community and distorting the marketplace,” he wrote in a blog post.
“The result? Many services rake in billions of dollars for themselves on the backs of music’s popularity but pay only relative pennies for artists and labels. Pirate sites operate with seeming impunity.”
And yet the US business is up 8.1% year-on-year, or up 5.7% if you take the wholesale figures. It’s clear that subscription streaming is growing strongly, despite the existence of YouTube as a free alternative.
“US streaming revenues were up 57% year-on-year to $1.6bn reported the RIAA, which says they now account for 47% of the US recorded-music industry’s revenues – up from 32% in the first half of 2015. These figures include paid subscription, ad-supported services (YouTube include) and SoundExchange payouts from radio-like services like Pandora and SiriusXM.
Paid subscriptions are the big success story in the US though, up 112% to $1.01bn in the first half of 2016. The number of paying subscribers in the US doubled to 18.3 million in the last year, too.
“Music subscriptions are now significantly bigger revenue generators than CD sales, and virtually equal to permanent downloads,” explained Sherman in his blog post. The RIAA reports that SoundExchange distributions grew by 4.1% to $403m in the first half of 2016, while ad-supported online streaming grew by 23.4% to 195m.
Digital is now 80% of the US market by value – $2.7bn in the first half of 2016 – and that’s with download sales declining by 17% to $1bn, and physical sales falling 14% to $672m. With even vinyl sales down (by 6% in value) streaming is now where the growth is in the US – and it’s driving the overall market higher.
This should be reason for celebration after the tribulations of the post-Napster music business. That value-gap argument isn’t going away though.
“Does it make any sense that approximately 1000 plays of a song on one streaming service yields dramatically different payouts than a song on a different service that gets to hide behind the failing 1998 Digital Millennium Copyright Act?” blogged Sherman, above a graph comparing Spotify and YouTube payouts to make it clear exactly who he was referring to.
“One might therefore conclude, based on that data and the billions and billions of music streams on YouTube, that it would have an outsized, dominant contribution to the American music business. But just the opposite is true,” wrote Sherman, citing the $195m figure for ad-supported on-demand streams.