U.S. 2015 Recorded Music Sales Up
The music business continues to expand into new markets and create new business models, attracting more users to digital music services and bringing artists to a wider global audience. In 2014, the industry’s global digital revenues increased by 6.9 per cent to US$6.85 billion. For the first time, the industry derived the same proportion of revenues from digital channels (46%) as physical format sales (46%), according to the IFBI Global Music Report. Globally, digital now accounts for 46 per cent of total industry global revenues and in four of the world’s top 10 markets, digital channels account for the majority of revenues.
According to the RIAA’s 2015 year-end music sales & shipments report, the U.S. recorded music industry continued its transition to more digital and more diverse revenue streams in 2015. Overall revenues in 2015 were up 0.9% to $7.0 billion at estimated retail value. The continued growth of revenues from streaming services offset declines in sales of digital downloads and physical product. And at wholesale value, the market was up 0.8% to $4.95 billion – the fifth consecutive year that the market has grown at wholesale value.
2015 was a milestone year for streaming music. For the first time, streaming was the largest component of industry revenues, comprising 34.3% of the market, just slightly higher than digital downloads. The streaming category includes revenues from subscription services (such as paid versions of Spotify, TIDAL, and Apple Music, among others), streaming radio service revenues that are distributed by SoundExchange (like Pandora, SiriusXM, and other Internet radio), and other non-subscription on-demand streaming services (such as YouTube, Vevo, and ad-supported Spotify).
All parts of the streaming music market grew in 2015, and total streaming revenues exceeded $2 billion for the first time ever. Combining all categories of streaming music (subscription, ad-supported on-demand, and SoundExchange distributions), revenues grew 29% to $2.4 billion. Paid subscription services were the biggest – and fastest growing – portion of the streaming market. The launch of new services like TIDAL and Apple Music made this one of the most watched and talked about spaces in the industry. In 2015, revenues from paid subscriptions grew 52% to $1.2 billion. At the same time, the number of paid subscriptions grew 40% to an average of 10.8 million for the full year.
Based on RIAA’s sales database, SoundExchange distributions grew 4% to $803 million, and on-demand ad-supported streaming grew 31% y-o-y to $385 million. Digital accounted for 70% of the overall market by value, compared with 67% in 2014. Even though digital download revenues (including digital tracks and albums) declined 10% to $2.3 billion, the total value of digitally distributed formats was up 6% to $4.8 billion, compared to $4.5 billion in 2014. Total value of shipments in physical formats was $2.0 billion, down 10% versus the prior year. Vinyl LPs were up 32% by value, and at $416 million were at their highest level since 1988. Synchronization royalties were $203 million, up 7% versus the prior year.
According to the Nielsen Music Report, Vinyl LPs continued to set new all-time highs with nearly 12 Million units sold in 2015. Independent record stores continue to be the biggest driver of Vinyl LP sales, with over 45% of Vinyl LP sales coming from the Independent stores. Rock is still the biggest genre for Vinyl LPs with over 68% of Vinyl LP sales coming from Rock titles. Vinyl LPs continued to set new all-time highs with nearly 12 Million units sold in 2015.
Overall, the data for 2015 shows a music industry that continues to adopt digital distribution platforms for the majority of its revenues. While overall revenue levels were only up slightly, large shifts continued to occur under the surface as streaming continued to increase its market share. In 2015, the industry had the most balanced revenue mix in recent history, with just about 1/3 of revenues coming from each of the major platform categories: streaming, permanent downloads, and physical sales.
For many small companies and artists, licensing of their content is a key method of earning revenues, including monetization of digital content. Therefore it is critical for businesses to protect their intellectual property, in order to adequately and fairly monetize the content for rightful owners and creators. The music industry is ever challenged to monetize and has good growth potential in several markets, but is persistently challenged by losses due to piracy, which are difficult to quantify, and by consumers who wish to listen to music on multiple devices for free.
The music business depends on copyright protections and certainty in legal markets. It is critical to understand that the industry is governed by two copyrights: a musical composition copyright and a sound recording copyright. This means, the notes and lyrics have one, i.e., the musical composition, and the recorded version has one, i.e., the sound recording. This in turn complicates the income generation for musicians, labels, and music publishers.
For more in-depth analysis of RIAA’s 2015 year-end music sales & shipments report, visit riaa.com