Streaming Music Sales Leap 43%, Says RIAA, Pushing Copyright Updates
Streaming music sales, 65 percent of music industry revenue last year, grew 43 percent to $5.7 billion, RIAA reported, as its continues seeking copyright law updates to match such changes. Paid subscriptions were the biggest growth driver for the music industry, RIAA said, posting $4 billion in revenue, up 63 percent. Paid subscriptions comprised 47 percent of the total recorded music market. RIAA differentiates full-service paid subscriptions and limited-tier services such as Amazon Prime and Pandora Plus, which accounted for 14 percent of subscription revenue vs. 11 percent in 2016.
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Physical products surpassed digital downloads for the first time since 2011, with downloads dropping 25 percent year on year to $1.5 billion. Physical product sales dipped 4 percent in a year, despite vinyl sales growing 10 percent to $395 million. CDs continued their descent, by 6 percent, to $1.1 billion. Revenue from shipments of physical products was 17 percent of the industry total in 2017.
Sales from on-demand ad-supported streaming services grew 35 percent to $659 million in 2017. It quoted tracking services including Nielsen and Border City Media estimating ad-supported services streamed more than 300 billion songs to U.S. listeners last year but qualified those numbers as “understated” due to unreported streams on YouTube.
Total revenue from digital and customized radio services was $914 million, down 5 percent. The category includes SoundExchange distributions for sales from services like SiriusXM and internet radio stations, plus payments directly made by other ad-supported streaming services, which represented 29 percent of the digital and customized radio services category, up from 8 percent in 2016.
Overall, recorded music revenue in the U.S. grew 16.5 percent to an estimated retail value of $8.7 billion, the same overall revenue level as 2008 and 40 percent below peak levels. “There’s still much work to be done in order to make this growth sustainable for the long term,” said CEO Cary Sherman. The 2017 increase was the first time since 1999 that music revenue “grew materially” two years in a row, making it a “fragile recovery,” with surging streaming spending offset by sales declines in physical media and downloads.
Sherman said the music industry continues to operate in a “distorted marketplace, replete with indefensible gaps in core rights, inhibiting investment in music and depriving recording artists and songwriters of the royalties they deserve.” The playing field remains “remains unfairly tilted” with a “value gap” between the amount of music consumed and the compensation platforms return to music creators.
Although the migration to digital is powering the music industry’s recovery, Sherman criticized current laws because “not all platforms pay artists and labels fair rates reflecting market value for the use of their music.” AM/FM pays artists and labels nothing for the commercial use of their music, and SiriusXM, he said, “pays under a below-market rate standard set more than 20 years ago when Sirius and XM were mere start-ups instead of the merged, wildly successful satellite service it is today.”
Sherman applauded efforts by Congress with the Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (Classics) Act (HR-3301) (see 1803140061) that he said would “modernize music licensing” and benefit songwriters, recording artists, producers and digital music services. Beyond ensuring all platforms pay based on the same market-based rate standard, the Classics Act “would correct one of the most glaring injustices in the streaming music economy,” he said: “Because of a quirk in the law, legacy artists who recorded music before 1972 are not guaranteed royalties under federal copyright law when their music is played on digital radio outlets.”