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Broadband Fuels Explosion in Music Streaming

04.05.2017

The always-connected, ubiquitous internet has transformed the music business. For the first time ever, streaming music platforms such as Spotify and Apple Music have generated the majority of the music industry’s revenue in the U.S., according to the Recording Industry Association of America (RIAA).

In 2016, estimated retail revenues for recorded music grew by 11.4 percent to $7.7 billion, the largest annual gain since 1998. Streaming music grew by 68 percent to deliver $3.9 billion of the industry’s retail dollars, just over 50 percent of the total revenue. Only five years ago, streaming music accounted for just nine percent of the industry’s revenue.

More music lovers are choosing subscription or ad supported services that give them on demand access to unlimited music libraries. Park Associates reported that as of Q3 2016, one-third of U.S. broadband households subscribe to a paid streaming music service, up from 26 percent in 2015. The research firm found that a majority of paid streaming music services experienced an increase in their number of subscribers in 2016, with Amazon Prime Music taking the lead at 15 percent.  

Spotify nearly doubled its subscriber base, going from four percent in 2015 to seven percent in 2016. Sirius XM Streaming, Apple Music and YouTube Music all experienced modest subscriber increases in 2016, while Pandora and Google Play Music subscription base only increased slightly compared to 2015.

Also pushing the trend to subscription service are connected consumer devices, such as smart phones, wireless speakers, sound bars, and smart home access ports like Alexa and Google Home, that offer a direct connection to the leading music services.

According to Parks Associates:

  • Fifty-eight percent of U.S. broadband households stream music or audio outside the home.
  • On average, U.S. broadband households stream 3.6 hours of music or audio per week on computers.
  • U.S. broadband households stream on average 2.7 hours of music or audio per week on smartphones.

Digital downloads, which once dominated the online music marketplace, have been on a steady decline, according to the RIAA. Overall, digital download revenue was $1.8 billion, down 22 percent from 2015. Individual track sales revenue was down 24 percent, and digital album revenue was down 20 percent compared with the previous year.

The total value of shipments of CDs and vinyl decreased 16 percent to $1.7 billion. The share of the market from physical music products fell to just 22 percent, down from 29 percent in 2015. Physical products had been more than half the market (by value) as recently as 2010, according to the RIAA.

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