Washington, DC (March 26, 2018)—With digital downloads falling off a cliff and CD sales dwindling, a massive surge in paid music subscriptions and the continuing rise in vinyl shipments drove U.S. music revenues to a second consecutive year of growth, according to the RIAA’s 2017 year-end report.
Recorded music revenues in 2017 rose 16.5% at estimated retail value to $8.7 billion, marking the first time since 1999 that recorded music sales have grown materially two years in a row, says the RIAA report. As in 2016, that growth was driven by paid music subscriptions to services including Spotify, Amazon, Tidal, Apple Music, Pandora and others.
Cary Sherman, RIAA chairman and CEO, writing in a post on Medium, stated, “We’re delighted by the progress so far, but to put the numbers in context, these two years of growth only return the business to 60% of its peak size — about where it stood 10 years ago — and that’s ignoring inflation.”
This past year’s overall revenue increase of 16.5% is not only the second year of double-digit gains but also suggests that growth is accelerating, showing a significant uptick compared to 2016’s jump of 11.7% over the previous year. Growth came primarily from streaming revenue. In 2016, paid and ad-supported music subscription services accounted for more than half of all revenue (52.9%) for the first time. In 2017, total streaming revenues rose 45% to $5.7 billion, or nearly two-thirds (65%) of total industry revenues.
Paid subscriptions made up 47% of the total revenue, or $4.1 billion, on their own. The number of paid subscriptions increased 56% to approximately 35.3 million, compared to 22.7 million in 2016. Ad-supported services contributed $659 million, a 34.6% increase over 2016.
“Music is a digital business, with more than 80% of overall revenue stemming from an array of digital platforms and services,” Sherman also wrote. But digital downloads suffered a double-digit decline for the third consecutive year, plunging 25% to $1.3 billion, or 15% of total industry revenue, with track sales down 25% and digital albums dropping 24%.
Physical products are still hanging in there, with sales slowing just 4%, buoyed by a 10% rise in vinyl sales, which added $395 million to the total. CD shipments continued to decline, falling 6%. Combined, physical sales accounted for $1.1 billion or 17% of the industry’s total revenue.
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As in previous years, Sherman also pointed out the “value gap” created by some digital platforms not paying their fair share for music use: “[W]e continue 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 RIAA supports legislation pending in Congress “that will modernize music licensing for the benefit of songwriters, recording artists, producers and digital music services alike,” wrote Sherman. The CLASSICS Act is intended to ensure that all platforms pay the same market-based rate standard and addresses the quirk in the law that freezes out artists whose music was recorded before 1972’s copyright legislation from collecting payments from digital radio outlets.
Recording Industry Association of America • www.riaa.com