Digital download sales are likely to increase again in 2013. But by one measure, downloads actually peaked in 2011. Download sales accounted for 73% of digital revenues in 2011 and fell to 70% last year, according to annual shipments tracked by the Recording Industry Association of America (RIAA).
Not that download sales have declined over the years. Track and digital album sales have each grown every year since the RIAA began reporting them in 2004. As a percent of total revenue -- counting both physical and digital revenue as well as synchronization royalties -- download sales rose to 40% from 36% in 2011; 31% in 2010; and 24% in 2009.
Nor have download sales declined in dollars. In fact, annual download sales continue to grow each year. Track and album sales grew by $235 million last year and gained a combined $912 million in the three-year period of 2010 through 2012. Download revenue is likely to grow again in 2013 by very low single digits.
Yet new business models are eating into downloads' dominance. Services such as Spotify, Pandora and SiriusXM grew by $405 million in 2012 and $1.22 billion in the three-year period of 2010 through 2012 -- both much higher than downloads' gains. Another key factor: download sales growth has almost stalled this year after years of double-digit gains.
But downloads' grip on digital revenues will ease over time because subscription and streaming services are experiencing high growth rates. Subscription and streaming services grew by 69% and 59% in 2011 and 2012, respectively. Royalties from services that pay royalties to SoundExchange -- such as Pandora, iHeartRadio and SiriusXM -- grew by 58% last year.
The market is clearly shifting toward streaming services. The numbers suggest we may be beyond the tipping point.