From traditional paid downloads to the streaming service – it’s clear the the digital distribution of music is giving the music industry a much-needed boost, with global music sales this year experiencing its first upswing in growth since 1999 (the year Napster launched – coincidence?).
The marginal but crucial 0.3% rise to $16.5 billion worldwide is largely thanks to the growing sectors of music streaming services and digital sales and if its ongoing contribution to the industry persists, its expected that digital music will surpass physical sales of music in less than five years, according to a new industry report, as covered in the LA Times.
Global digital revenue is projected to reach $11.6 billion by 2016 according to a report by US capital firm Siemer Ventures, which indicates that digital will dominate the majority of sales by 2017, well and truly overtaking sales of physical products like CDs, DVDs, and the small but nevertheless resurgent vinyl boom.
Digital sales have already overtaken physical in a few cases, such as in the UK’s first sales quarter of 2012 and is projected to do the same in Australia. Interestingly however, Siemers indicates that while revenue from digital downloads and streaming is expected to grow 12% each year – to the $11.6 billion figure – the overall global music industry will continue to shrink, to $26.5 billion in 2016, revenue from digital downloads and streaming is expected to grow 12% each year to around $11.6 billion.
Digital overtaking physical sales is chiefly due to the boom of streaming platforms, such as Spotify, Deezer, and Rdio, to the huge popularity of Internet radio services like Pandora and iHeartRadio, as well as online video sites like YouTube and Vevo. All platforms referred to as ‘access models’ by the RIAA who reported that they helped anchor music sales in America despite an overall drop in 2012. Global digital revenue is projected to reach $11.6 billion by 2016 [and] well and truly overtaking sales of physical products…
Closer to home in Australia, digital has already helped push sales, registering a 6.8% leap last year and despite the crowded market, is likely to grow with the introduction of new streaming services from major players Google and Sony, who launched their new music subscription based services – Google Play Music All Access and Music Unlimited respectively – this month, while Apple’s iTunes Radio is just around the corner.
All signs show that the growth in revenue from online streaming is unlikely to slow. In 2012 it reached $1.1 billion, jumping up 40% while traditional paid downloads grew by 8.5%, which is thanks to the growth of users by 9% to 1.2 billion total users of streaming services – a figure that’s expected to grow to 1.8 billion by 2016.
“You’ve got a lot of initiatives that are going to bring in people who are not already engaged with digital music,” says Siemer senior advisor John Rudolph. “We tend to think services like Pandora are ubiquitous, and they’re not.”
“One of the big issues that all those folks have is, how do they account for the rights-holders and how do they establish an efficient licensing scheme,” adds Rudolph. “Now they’re looking internally and going, how do we actually pay people and track content?”
While digital music has attracted big interest from investors – Spotify garnering more than $100 million from the likes of Coke, Deezer nearly $130 million from the owners of Warners Music Group, and the still-to-be-launched Beats Music gaining $60 million from investors – many musicians supplying the ‘content’ through their record labels and distributors are wondering where the money is going if not to them.
It’s an issue that was given a major profile when Thom Yorke and Nigel Godrich of Atoms For Peace pulled music from Spotify in protest over a royalties model that pays artists “fuck all” and is “bad for new music”, while Australian royalties collection agency APRA joined the chorus, saying that streaming services would “fail” artists if they did not fix their payment schemes.
So while a future where the dominant part of the music industry is relying on digital to generate revenue is likely, if the Siemer report’s projected $11.6 billion rings true – where digital sales overtakes physical – record labels and streaming services need to figure out how to satisfy the musicians and artists supplying the ‘content’ to ensure they get a slice of what is becoming a very big financial pie – or find themselves with more angry bands than just Atoms For Peace, Pink Floyd, and Grizzly Bear on their hands.
