Paid subscriptions drive US music revenue to $8.7b, highest in ten years

Figures for 2017 released overnight by the RIAA showed that revenue from recorded music increased 16.5% at estimated retail value to US$8.7 billion.

This was a second year of consecutive growth, something that hadn’t happened since 1999.

In the year before, revenues had underwent a 12% double digital hike from $6.7 billion.

The RIAA attributes this growth to “the result of years of painstaking work” by record companies around the world.

At wholesale, 2017 revenues grew 12.6% to $5.9 billion.

The increases continued to come from mostly paid music subscriptions to services as Spotify, Apple Music, Tidal, Amazon and Pandora.

According to Joshua P. Friedlander, senior vice president of RIAA’s revenue statistics division, “At $8.7 billion, the industry has taken a decade to return to the same overall revenue level as 2008, and is still 40% below peak levels as the growth from streaming has been offset by continued declines in revenues from both physical and digital unit based sales.”

STREAMING

This contributed to 65%, almost two-third, of total US music industry revenues in 2017 and contributed nearly all of the growth.

Streaming revenue incorporated those from premium subscription services, streaming radio services including those revenues distributed by SoundExchange (like Pandora, SiriusXM, and other Internet radio), and ad-supported on-demand streaming services (such as YouTube, Vevo, and ad-supported Spotify).

PAID SUBSCRIPTIONS

Paid subscriptions were the biggest growth driver for the music industry in 2017.

Year-over-year revenue growth of 63% brought total subscription revenues to more than $4 billion for the first time.

It is by far the biggest format of recorded music in the United States, comprising 47% of the total market

ON DEMAND STREAMING SERVICES

Revenues from on-demand streaming services supported by advertising grew 35% to $659 million in 2017.

These services streamed an estimated 300 billion songs in the US through 2017.

But the figure is understated because figures from YouTube, the most widely used music service, are not reported.

DIGITAL AND CUSTOMISED RADIO SERVICES

Total revenues from these were $914 million, down 5% from 2016, and accounted for 29% of the digital and customized radio services category in 2017.

CDS AND VINYL

The physical format of CDs and vinyl are now 17% of the American market, making up $1.5 billion in revenue after a 4% drop from 2016.

Vinyl was up 10% to $395 million.

This was the first time that physical music sales surpassed digital downloads since 2011.

DIGITAL DOWNLOADS

Digital downloads had sharp 25% drop, to $1.3 billion.

Album unit sales in this format fell 22% to 66.4 million from 85.1 million, with album revenue alone just $623.7 million, 23.8% down in revenue from $818.8 million in 2016.

SYNC

Synchronisation made up $232.1 million in revenue, making up 2.7% of the total.

It was up 13.5% from the $204.4 million generated in 2016.

RIAA CEO Cary Sherman said that record companies were to take credit for the uptick in revenues.

“This remarkable re-invention didn’t happen by accident,” he emphasised.

“It is the result of years of painstaking work by record labels who continue to strengthen the teams and systems necessary to support an artist’s ambition, all while working closely with hundreds of digital platforms to bring music to fans in new and innovative ways."

He pointed out that record labels around the world spent an estimated $4.5 billion a year in discovering and developing new artists.

“The Internet offers countless opportunities to distribute music, but with millions of songs and tens of thousands of albums released annually, it’s increasingly difficult for artists to break through and be discovered by fans,” he added.

“Record labels help artists stand out and elevate the music to the next level, whether it’s an established act or an up-and-coming new artist.”

RIAA report and analysis available here.