Last year, the Australian music industry enjoyed a boom after a few years of steady decline, as digital music and streaming services delivered the first signs of revenue growth since 2009.

But a lot can happen in 12 months, and as the Australian Recording Industry Association released its annual figures for 2013 overnight, they demonstrate that the Aussie market has experienced its worst ever drop – of almost 12 per cent – while looking long term, the industry has almost halved in value in a decade.

ARIA’s figures show the total revenue for recorded music was at $352 million in 2013, a dip of $11.6 (around $46.5 million) from 2012’s revenue of $398 million, essentially cancelling out the 6.8% growth experienced the same year.

The overall picture is that while digital music sales and streaming services are growing – in fact doubling their revenue streams in 2013 – it wasn’t enough to fill the gap created by the sharp decline in revenue from physical sales, which dropped by 25.5% in the same year.

Commenting on the 2013 figures, ARIA CEO Dan Rosen said: “The way that music is discovered and enjoyed by fans continues to evolve, and as the industry continues to transform itself, the sales trajectory will not always be a straight line.”

Digital Outsells Physical For The First Time

As predicted in December 2012, digital music revenues have now overtaken physical sales in Australia for the first time ever. Combined digital music revenues accounted for 54.7% of the market, bringing in over $192 million, while CDs, DVDs, and other physical media made up the remaining 45.3% share.

By dollar value however that meant digital sales increased by nearly $8 million but couldn’t account for a physical sales drop of approximately $55 million in the same 12 month period.

That said, digital download revenue stabilised in 2013, with an overall increase of 0.5%, while digital album sales rose 7.88% to 7.37 million units (a value of $67.4 million), but digital single sales fell 3% to 106.9 million units ($95 million), which is symptomatic of more people adopting digital music streaming services to consume music, as shown by streaming revenue almost doubling in 2013, now making up 5.9% of the total market value.

Though digital music and streaming services revenue are yet to account for the significant losses in physical, ARIA’s Dan Rosen is optimistic these fortunes will be reversed in future.

“We have seen in other territories around the world that as streaming services gain momentum, strong market growth has followed,” he said.

“It is an exciting time, as Australian music fans are consuming more music than ever before with an ever-expanding range of options to access music – whether it is streaming music, digital downloads or visiting the local record store.”

Digital Growth Failed To Compensate For 25% Drop In Physical

On-demand subscription based models and streaming services may be the great white hope of the Aussie music industry, but in 2013 they simply couldn’t make up the revenues lost in physical sales.

The sharp 25.5% dip was chiefly owing to the value of CDs – once the great unit shifter of the music industry but now cheaper than they’ve ever been – seemingly stuck in a downward spiral. All the more alarming given that CDs are still physical’s biggest earner, pulling in just over $141 million in 2013 – putting their monetary value down to a staggering 26.74%.

Broken down, 25% of that figure is CD album sales, at 14.22m units ($141.7m in value), while CD singles (where do you even buy those anymore?!) sold 87,000 units ($360,000 in value).

While CDs crashed spectacularly there is one physical format that continues to buck the trend…

Vinyl Is Still The Great Anomaly

The vintage format keeps on spinning and vinyl’s ongoing resurgence continued in 2013, rising a remarkable 77% up from 2012 as 137,000 vinyl albums moved off of record store shelves in 2013.

It’s the only physical format to show growth in recent years, with ARIA figures showing that vinyl doubled in size from 2011 to 2012, where Rosen remarked at the time that vinyl had been “an interesting phenomenon… admittedly from a low base [it] went from approximately $1 million in sales to almost $2 million in sales in 12 months.”

The appeal of the ‘little wax format’ that could in an increasingly digital music landscape has been covered before. Owing to nostalgia, its ‘hip’ factor to a younger generation, and keeping independent retailers afloat plus the growing success of Record Store Day each year (with 2013 the biggest yet), but vinyl is still a niche section of the market.

Compared to the rest of the music industry, the 137,658 vinyl albums sold in 2013 is a relatively meagre figure, which along with vinyl singles (down to 87,098 units in 2013) only brought a combined revenue of $3,202,726 to the Australian market, still only a fraction of $141 million that CDs provided despite their huge drop.

Aussie Market Value Has Nearly Halved In 10 Years

Along with ARIA’s 2013 wholesale figures, the industry body also provides a graph that shows that the market’s wholesale value of $351,619,000 is the lowest since digital music sales were first introduced in 2005, and looking further back nearly half that of the industry’s value in 2003 of $656,002,000.

The below graph shows that steady drop over 10 years; the green represents digital and the red represents physical – generally showing that while the green gets bigger over time, it’s not growing at a rate fast enough to overtake the rapidly shrinking physical sales and their greater profit margins.

For better or worse, 2014 is going to be a major turning point. It’s clear that physical sales are unlikely to recover while digital continues to dominate the market, but will the rise of streaming services – which have shown exponential growth since their introduction to Australia two years ago – and digital sales be enough to compensate for the hole in profits that CDs, DVDs, and digital singles once provided?

We’ll have to wait and see, but it’s going to be a pretty terse few months before we know for sure.

(Click To Enlarge)

ARIA 2013 Sales Graph

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