Streaming Becomes Music Industry’s Biggest Revenue Source

Online music streaming for the major music labels has reached a huge milestone. It is now the biggest source of revenue.

For well over a decade, a common argument about filesharing is that if the record labels adapted their business model, things will improve. This has been going on since at least the age of the original Napster. People found themselves downloading the latest hits on their dial-up connections. Unfortunately, the music industry had only one thing in mind: litigation.

After Napster was shut down, filesharers merely moved to other services. File-sharing flourished well beyond the userbase of Napster. Years of litigation later and the problem persists. It didn’t matter if KaZaA, eMule, Morpheus, Limewire, or even BitTorrent became the popular name in filesharing, the argument remains the same: adapt or lose out.

In some respects, it was fortunate that the likes of Apple and others at the time staged an intervention of sorts. They built the business model for the highly reluctant record labels. Even with all the legwork done for the music industry, litigation persisted. Filesharers were sued by the hundreds of thousands, lobbying skyrocketed to prop up a failing business model, and the controversy continued.

While litigation, DRM, three strikes laws, high profile takedowns, and even censorship proved to be an unmitigated failure, some were able to focus their attention on the small green chutes of success when the record labels budged an inch on the adaptation argument. Music sales grew, streaming helped things along, and observers pointed out the success to an industry more concerned with pushing a “sky is falling” agenda.

Now, here we are today, with word that streaming has now become the number one source of revenue for the industry. While many in the industry still have no problem crying “piracy!” to this day, it seems that the argument to adopt a forward looking business model is proving to have been the answer all along. From Forbes:

Sales are down and streaming is king, and the gap between how well the two different fields are doing is widening all the time. According to the 2018 edition of the annual Global Music Report released by the IFPI (International Federation of the Phonographic Industry), the global recorded music market expanded once again last year, growing 8.1% and rounding out to $17.3 billion. That’s a huge improvement from just a few years ago, but the business is still down from its 1999 peak, and it has a long way to go before it reaches previous highs.

In 2017, streaming accounted for 38.4% of global music industry revenue, or $6.6 billion, a new high for the format. That also means that for the first time in history, streaming became the single largest revenue source in the global music industry. Any notions that streaming activity isn’t growing the industry should finally be put to bed, and while there are certainly plenty of issues when it comes to companies like Spotify and Apple Music, there’s no argument that there isn’t a bright future when it comes to streaming.

All forms of digital revenue combined into one category are now responsible for just over half (54%) of the money pouring into the global recorded music market, vertical rose by just over 19% to $9.4 billion, powered almost exclusively by the forward surge streaming platforms enjoyed. When streaming numbers are extracted, digital (which can then read as digital sales) is now just 16% of global recorded music revenues. Digital downloads are taking the hardest hit in the business, and those revenues dipped by a sizable 20.5%.

While it may be hard to imagine why there needs to be any further additions to the body of evidence that adaptation can very easily reap huge dividends as opposed to enforcement, it certainly doesn’t hurt either. To date, adjusting the business model to better suit a modern era still proves to be the only thing that has a proven track record of success today.

We’ve seen bandwidth throttling, mass litigation, high profile take downs of pirate groups and high profile websites, lobbying for longer copyright terms, DRM, three strikes laws, deep packet inspection efforts, global watchlists, and a whole lot more. We are not aware of any verifiable evidence that has shown that any of these efforts have gotten people running back to bricks and mortar stores to buy albums in any significant or measurable way. In fact, there is actually evidence to suggest that these efforts have hurt the music industries cause.

There is certainly some debate whether or not these new business models are entirely sufficient to suit the technological realities of today. Still, it is positive news that shows that adapting that old business model may have been a good step all along.

Drew Wilson on Twitter: @icecube85 and Google+.


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