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Five Takeaways From RIAA’s 2021 Report: Big Business, Bigger Growth, Biggest Vinyl Shipments

Ad-supported on-demand streaming had itself a year -- while strong vinyl/CD sales helped take a 1% bite out of digital's overall share.

The RIAA’s 2021 year-end report on the U.S. recorded music business showcased plenty of significant numbers: $15 billion in revenues, 23% growth, eye-popping figures and plenty of optimism ahead. But digging deeper into the numbers reveals a few more subtle trends, in such areas as inflation, percentage growth, vinyl shipments, ad-supported on-demand streams and digital revenue share, to name a few.

Here are five takeaways from the new year-end report.

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Explosive Growth

At this point, the return to growth of the U.S. recorded music business is nothing new — revenues have been up for six straight years now after more than a decade of decline. But the rate of growth in the past year is still eye-opening: 23% is a huge jump compared to years prior, when growth was still high, but not anywhere near those figures. Consider, since bottoming out in 2014 and remaining essentially flat in 2015 ($6.9 billion apiece), growth has been relatively steady in the low-double-digit range: up 11.4% in 2016 ($7.7 billion), 16.5% in 2017 ($8.7 billion), 12% in 2018 ($9.8 billion), 13% in 2019 ($11.1 billion) and 9.2% in a pandemic-affected 2020 ($12.2 billion). And considering that actual growth is easier to maintain than percentage growth, then that 23.4% figure over 2020 is even more impressive.

How Big Is the Business Really?

For decades, the high-water mark for the U.S. recorded-music business was 1999’s $14.6 billion, a figure achieved at the peak of the CD boom and right before the likes of Napster and Limewire (and iTunes) began to push a reluctant business inexorably into the digital age. But while 2021’s $15 billion is eye-catching in absolute numbers, it’s not actually the best year ever for the business: the RIAA notes that with inflation, it’s actually still 37% lower than that 1999 benchmark. So how big is the biz, really? Well, according to the U.S. Inflation Calculator, $14.6 billion in 1999 money would be about $23.75 billion in 2021 dollars, which would make 2021’s $15 billion off the pace. Put another way, the $15 billion put up in 2021 would equate to about $9.22 billion in 1999 dollars, give or take. So the gap is still big from the heyday of the turn of the century, but it’s another step in the right direction.

Ad-Supported On-Demand Streaming Roars Back

In the RIAA’s 2020 year-end report, ad-supported on-demand streaming took a noticeable hit in growth, both in absolute terms and by percentage, which was chalked up to the fluky ad market caused by the onset of the pandemic. In reality, however, the growth — up 16.8% over 2019 — wasn’t too out of line with the levels of the two years prior to that, when the sector grew 15.3% in 2018 and 19.6% in 2019. But that particular revenue pot roared to much higher growth in 2021, up 46.7% to $1.76 billion — making it by far the second-largest source of revenue (behind paid subscriptions) for just the second year ever, after it nudged into that territory last year. And while it’s still dwarfed by the revenues from paid streaming — a cumulative $9.5 billion in 2021 — the fact that ad-supported on-demand revenue has nearly doubled since just 2019 (when it was $908 million) certainly bodes well, and reflects the increasing importance of revenues from the likes of YouTube, TikTok, Facebook and Spotify’s ad-supported tier.

The Amount of Vinyl Units Shipped Exploded

Another story that has been covered extensively is the growth of vinyl, and for good reason — the RIAA report says that the format passed the $1 billion revenue mark for the first time since 1986. (This writer was born in 1989.) But another story that has, also rightfully, been covered extensively of late has been the pandemic-fueled supply chain issues that have contributed — not entirely caused, but contributed — to vinyl pressing-plant delays and industry-wide frustration at the lead time required to get vinyl pressed and shipped in the past year or so. Well, another way to assess this issue is to look at production capacities as a whole: not only did vinyl revenue grow 61% over 2020, but vinyl shipments grew 67% year over year to 39.7 million units, far exceeding the 23.7 million units shipped in 2020. So, the demand is there, the production is keeping pace, but there are still issues in the industry — will we see more pressing plants begin to sprout up, or other solutions to this issue? Consider that just five years ago, in 2016, just 17.2 million units were shipped — units shipped have more than doubled in that time span and things do not appear to be slowing down. Something, surely, has got to give.

Digital’s Overall Revenue Share Actually Declined

Obviously, the story of this half-decade of growth has been a digital one: digital revenues passed physical revenues as a percentage of the business all the way back in 2011, and the gap has only widened since. But, in another quirk of the numbers this past year, digital’s percentage of overall revenues actually declined in 2021, from 90% in 2020 to 89% in 2021. That has a lot to do with the growth in vinyl and CD sales — the first time they both increased in the same year since 1996 — but is also just a factor of percentage growth: the higher you go, the harder it is to maintain those percentage growth numbers. It’s not a hugely significant change — the percentage of physical revenue went from 9.6% in 2020 to 11% even in 2021 — but we’re still talking about a couple hundred million dollars. Call it a fun trivia answer to a question that no one will ask one day.