Recorded-music revenues in the US grew by 11.4% to $7.7bn in 2016, but industry body the RIAA is determined to continue pressing for reform of the safe-harbour protection afforded to YouTube.
The organisation published its annual industry-revenue figures this afternoon, with the headline $7.7bn figure referring to retail revenues: consumer spending on recorded music.
‘Wholesale’ revenues earned by labels rose 9.3% to $5.3bn, and as in other countries around the world, music-streaming is the engine of this growth.
In 2016, the average number of Americans paying for a music subscription was 22.6 million, more than double 2015’s figure of 10.8 million.
Revenues from those paid subscriptions grew by 114% to $2.5bn in 2016, accounting for around a third of overall recorded-music revenues in the US last year.
That contributed to a 68% rise in all forms of music-streaming revenue to $3.9bn, accounting for 51% of the overall market – the first time streaming has outweighed both physical and download revenues in the US.
For the first time, the RIAA is separating out “full-service” paid subscriptions like Apple Music and Spotify’s premium tier from “limited tier” services like Amazon Prime Music and Pandora Plus. The latter category accounted for $220m of the $2.5bn in 2016.
(Besides the $2.5bn of paid subscriptions, SoundExchange distributions grew from $803m in 2015 to $884m in 2016, while on-demand ad-supported streams grew from $373m to $469m in that period.)
Elsewhere in the US music market, it’s a familiar tale of declining physical and digital sales. Physical music sales dropped by 16% to $1.7bn in 2016, and are now just 22% of the market. Within that, vinyl album sales were up 4% to $430m though – not far behind the on-demand ad-supported streaming figure of $469m.
Music download sales fell by 22% to $1.8bn, including a 24% drop in individual track sales, and a 20% fall in digital album revenues.
Still, the overall picture is very positive: the 11.4% overall growth compares to the 0.9% rise in 2015, following the 2% growth in 2014. Happy days!
Yet this also presents a problem for the RIAA and the US music industry, as it continues its lobbying for reform of the DMCA legislation that grants ‘safe harbour’ to YouTube and other online services hosting user-generated content.
The argument of the music industry has always been that these safe harbours enable these services (and let’s be honest, we’re talking mainly about YouTube here) to provide unfair competition for the likes of Apple Music and Spotify, which can’t take advantage of the safe harbours.
That line of thinking rests on the existence of a DMCA-protected YouTube hampering the growth of the paid music-subscription services, yet 114% growth in revenues from that sector could be perceived to undermine the argument – in the eyes of legislators, at least.
That’s why the majority of RIAA chairman and CEO Cary Sherman’s blog post about today’s figures isn’t celebrating the growth, but instead is focusing on the safe-harbour issue.
Yes, Sherman hails “innovation, investment in great artists, hard work, and a relentless commitment to music” as well as “a tireless community of label entrepreneurs who approach each and every day with passion and conviction, both about music’s importance and the great artists who bring it to life”.
But he very quickly segues into the claim that “our recovery is fragile and fraught with risk” before diving back into warnings about the pressing need for DMCA reform.
“The unfortunate reality is that we have achieved this modest success in spite of our current music licensing and copyright laws, not because of them. That’s not the way it should be,” he wrote.
“For example, it makes no sense that it takes a thousand on-demand streams of a song for creators to earn $1 on YouTube, while services like Apple and Spotify pay creators $7 or more for those same streams.”
“Why does this happen? Because a platform like YouTube wrongly exploits legal loopholes to pay creators at rates well below the true value of music while other digital services — including many new and small innovators — cannot.”
(A point worth further discussion: check the RIAA’s graph above comparing payments to music creators for 1,000 streams by Apple Music, Spotify and YouTube. It’s a useful illustration of the difference not just between DMCA-protected and non-protected streaming services, but also between the payouts of a purely-premium service in Apple Music, and a freemium one in Spotify.)
Sherman also referenced this week’s study by the Phoenix Center claiming that if YouTube were forced to pay comparable royalties to Spotify and Apple Music, it could amount to between $650m and $1bn extra a year for rightsholders.
“Government leaders can’t be satisfied with a dysfunctional and unsustainable status quo that devalues music. Collectively, it feels like a rigged system,” he wrote, threatening that it could “undermine the potential for further growth from subscription services”.
What Sherman’s blog post shows is a delicate time for the music industry’s campaign for safe-harbour laws to be modernised. Bodies like the RIAA are having to make a more nuanced argument than in the days when the enemy was piracy, and recorded-music revenues were declining sharply.
In 2016, recorded-music revenues rebounded strongly – we’re awaiting the IFPI’s figures in late April to see what that meant on a global basis – but the music industry’s challenge is to convince lawmakers that this doesn’t weaken the case for safe-harbour reform.
Meanwhile, YouTube will understandably use the RIAA figures to bolster its competing argument: that it is not hampering the growth of the subscription services, but is instead generating a revenue stream from music listeners who would not otherwise pay.