Streaming, Vinyl, Royalties & More: Five Takeaways From the RIAA's Year-End Report

Natcha29
   

When the RIAA released its revenue statistics for 2016 yesterday (March 30), the headlines were about the industry’s remarkable growth -- U.S. recorded music sales grew 11.4 percent, bolstered by the strength of streaming. That’s the first double-digit growth since 1998. But a closer look at the numbers reveals a few other notable trends.

It’s a streaming business

Streaming accounted for more than half of industry revenues in 2016, overtaking sales for the first time, a year before some analysts believed it would cross that threshold. Five years ago, streaming generated less than 10 percent of industry revenue -- a staggering pace of growth. And just as streaming drove industry growth, subscriptions drove streaming revenue. Of the $3.9 billion generated by streaming, subscriptions accounted for $2.48 million -- about a third of U.S. music revenue overall.

Subscriptions are selling

Over the course of 2016, streaming services had an average of 22.6 million subscriptions -- which means the number was higher than that by the end of the year. (That number was just 10.8 million in 2015.) That implies that about 10 percent of U.S. adults now subscribe to a streaming service, although multiple people may be using each account.

Digital Doldrums

As streaming takes over, download sales are declining faster than physical ones -- by 21.6 percent and 15.7 percent, respectively. That’s the fastest decline yet for download sales. Interestingly, though, revenue from singles sales is declining faster -- by 24.1 percent, while album downloads are down just 19.6 percent. For a format that was criticized for uncoupling singles from albums (the ability to purchase individual tracks rather than a full album), the fact that singles are declining at a higher rate than albums is surprising.

The vinyl revival is slowing -- but more important for stores

After several years of staggering growth in vinyl sales -- including a 32 percent increase in 2015 -- revenue from the format grew just 3.7 percent in 2016. Even so, since sales of CDs fell 20.9 percent, vinyl now accounts for more than a quarter (26 percent) of the revenue from physical sales.

Streams are worth more than ever

Not only is streaming revenue growing -- so is the average per-stream royalty. In 2015, the average per-stream royalty fell from $0.00666 to $0.00517, according to a Billboard analysis of statistics from the RIAA and Nielsen Music. Last year that number rose to $0.0072. Although it’s difficult to calculate the per-stream rates paid by individual services, a rise in the average rate -- presumably driven by a rise in subscriptions -- bodes well for the future of the format.