A new study shows the U.S. recorded music market — from artists such as Drake and Adele, to indie rock bands, to country acts and orchestras — is no longer in freefall.
In fact, music sales revenue posted double-digit growth in 2016 — its biggest gain in almost two decades. That is widely seen as good news in an industry long-ravaged by the decline of traditional CD and album sales.
But the most eye-catching details were about the rise of digital song streaming. Money from services such as Spotify, Apple Music and Pandora now make up almost 52 percent of industry revenue, according to the Recording Industry Association of America.
For the first time, streaming is the dominant revenue source — giving rise to such performers as hip-hop artist Chance the Rapper, who famously built a strong national following by releasing songs himself on digital streaming services. He begins a massive U.S. stadium tour this summer without signing to a major music label. Fans just found him online.
Just five years ago, streaming accounted for 9 percent of U.S. music revenue.
Music artists once feared streaming, which pays fractions of a penny each time a song is played online. Although those fractions can add up for the most popular acts — singer Ed Sheeran broke records recently when songs from his new album were streamed nearly 57 million times on Spotify in a single day — the industry fretted about trading the $10 CD for the .0005 cents or so each time a track is played online.
The new RIAA report was cheered as a sign that streaming could work for artists. Streaming revenue jumped 68 percent last year and, most encouraging, growth from paid music streaming subscriptions leaped 114 percent. (Streaming services such as Spotify offer free and paid tiers.) A paid subscription generally pays a greater royalty to artists for each song.
In a $7.7 billion U.S. market for recorded music, that’s a big deal.
But for all the cheerleading surrounding streaming, there is plenty of continued reasons to worry about whether digital streams can sustain professional musicians.
Although revenue grew 11.4 percent last year, the music industry is still earning just half of what it did 15 years ago. In harsh Wall Street jargon, some might worry last year’s bump was a “dead-cat bounce.”
Streaming revenue surged. But almost everything else continued to fall.
Shipments of music CDs dropped 21 percent last year, in terms of estimated retail value.
Money from digital downloads — such as Apple iTunes — fell 22 percent.
The only other growth came from vinyl record sales — up 4 percent — but that remains very much a niche product.
The problem for the music industry is whether the streaming services can continue to grow at such rapid rates — especially if the sale of physical music products continues to plummet.
It takes an estimated 1,500 song streams to make up the revenue from a single CD sale, according to Nielsen.
The music industry’s new growth “is fragile and fraught with risk,” warned RIAA chief executive Cary Sherman in a post on Medium.
Music continues to grow — overall music consumption was up almost 5 percent last year, according to a BuzzAngle Music report, driven by song streaming.
And there were 1.2 billion songs streamed each day on average in 2016.
The unanswered question is how we pay for those songs.