Subscription and streaming services experienced tremendous growth and accounted for 15% of record business revenue in 2012, according to RIAA statistics released Tuesday. That expansion helped digital revenue surge to 59% of total recorded music revenue from 51% last year but could not prevent total revenue from slipping 1% last year.
The growth in access models, or services that allow consumers to legally access music, show the industry is significantly monetizing a consumer behavior that has existed for years. Subscriptions services (such as Spotify, Rhapsody, Muve Music), ad-supported streaming services (such as YouTube and Vevo) and Internet (Pandora et al)) and satellite radio (Sirius XM) don't yet match download and CD revenue, but they have quickly grown from next to nothing in a few short years.
Revenues from subscription services and ad-supported streaming services grew 59% to $571 million from $360 million. The number of paid subscribers grew 86% to 3.4 million from 1.8 million (and 1.5 million in 2010). That 3.4 million figure is a weighted average number of subscribers during the year, not the number of subscribers at the end of the year (which was higher than 3.4 million).
Digital downloads had lower growth rates than subscription and streaming services but accounted for more revenue growth. Tracks and digital album sales combined to increase $235 million in 2012 compared to $170 million for subscription and streaming services. Track revenue grew just 7% while digital album revenue grew 13%. While their growth rates are modest, combined digital sales were over $2.8 billion, or 6.1 times as much as subscription and streaming revenue.
The industry’s hope is that new business models will overcome the losses of old formats. That did not happen last year. Physical revenue slipped $587 million and digital revenue gained just $497 million. The slight difference of $90 million represented less than a 1% decline in total revenue.
Total physical revenue dropped 17% last year, a much steeper decline than the 8% drop in physical sales a year ealier. CD unit sales fell 12% to 211 million and CD revenues tumbled 18% to $2.5 billion. Vinyl LP and EP sales rose 36% to $162 million.
Revenue from SoundExchange distributions grew 58% to $462 million from $292 million. (SoundExchange announced its 2012 distributions back in January.) Labels only got half of the $462 million, however. The other half was distributed to the recording artists, session musicians and backup singers.
The industry's tenure in positive territory was short-lived. Total recorded music revenues were up a scant 0.2% in 2011.