Subscribers Growing Faster Than Subscriber-Driven Revenue
The number of subscribers to full-service on-demand streaming services in the U.S. grew 42 percent over 2017, surpassing 50 million subscribers for the first time. But subscription revenue -- while still up a significant amount, 32 percent to $5.4 billion -- is growing slower, suggesting that discounted plans, like family, student or one-off deals, are helping drive subscriptions. And those numbers aren't an apples-to-apples comparison: The revenue number includes $747 million from limited-tier plans like Pandora Plus or Amazon Prime, while the subscriber numbers do not. That means subscription revenue from full-service plans is growing about half as fast as the number of subscribers.
How High Can Subscriptions Go?
The RIAA counted 50.2 million subscriptions to full-catalog, on-demand streaming services in the U.S. in 2018. Just four years ago, in 2014, that number was 7.7 million. But how high can it go? Netflix claims in the region of 60 million U.S. subscribers; SiriusXM counts 34 million; in January, Amazon announced that its Prime subscription service passed 100 million accounts, roughly the same number as signed up for cable at the peak of the TV era. These are all different models operating in different industries, but the point is, there's still room for growth, though it's not clear how much. And though percentage growth has declined year-over-year since the explosion in subscribers (+109 percent) in 2016, the actual number has grown each year: 11.9 million in 2016; 12.6 million in 2017; and 14.9 million in 2018. Where is the saturation limit?
Limited Tiers Growing Steadily
Since the RIAA began tracking limited-tier subscription revenue separately from full-service subscription revenue in 2016, it has remained a consistent and growing piece of the overall revenue pie. This year's $747 million is up around 30 percent from last year's total, nearly mirroring the 32 percent growth in overall streaming revenue, and remained a consistent 14 percent of the broader subscription streaming revenue pie. If it can keep up a similar pace, the sector could account for $1 billion by the end of this year.
Physical Goes Back to the '80s
In terms of physical sales, it's the 1980s all over again -- in two distinct, eye-opening ways. As overall sales revenue drops to just 23 percent of the pie, CD sales bore the brunt of it, dropping 32 percent to $698 million, which is the first time since 1986 that CD sales dropped below $1 billion for a year. (And remember, the format was only introduced in 1982.) On the other hand, vinyl sales just keep rising, ticking up another 8 percent in 2018 to $419 million, good enough for its biggest year since 1988. There are a variety of good and plausible reasons for this disparity, but it also means that it's not out of the question to see vinyl sales outstrip CDs in the near future -- another occurrence that hasn't been the case since the 1980s.