Streaming steadies U.S. record industry as 2014 revenue exceeds CD sales

Double-digit growth in all forms of streaming buttressed the U.S. music industry against the continued slide in music purchases, holding the industry’s total value steady at 7-billion dollars. For the first time, streaming revenue surpassed CD revenue.

SOURCE: RIAA 2014 Year-End Industry Shipment and Revenue Statistics ($000’s)

This according to the annual Music Industry Shipment and Revenue Statistics report from the Recording Industry Association of America (RIAA).

CD revenues dropped 12.7% from 2013 to 2014. A corresponding double-digit rise in streaming revenues (details below) lifted those earnings just above CDs, for the first time. Streaming brought in $1.867-billion for 2014, while CD sales earned $1.854-billion.

Across the entire recorded music business landscape, streaming accounted for 27% of revenue, up from 21% in 2013. Streaming services are pulling 29% more weight in the industry, year-over-year.

Music download sales continued a downward trend. Looking at the 2013 and 2014 reports side-by-side, it is clear that the decline of music downloads has accelerated. In 2014 the download sale of singles dropped 10.1%, and downloaded albums lost ground by 6.6%. In the previous year (2012-2013), those numbers were 3.4% and 2.4% respectively. (All growth and decline percentages in this article refer to revenue, not shipments. Both metrics are available in the public document.)

On the streaming side, revenues continued powering upward in 2014, as they did in the 2013 report. Three types of streaming models and revenue types are covered by the RIAA:

• SoundExchange distributions: (+31%) This bucket contains all non-interactive services which pay statutory music licensing royalties collected by SoundExchange. The market-leading example is Pandora.
• Paid subscriptions: (+25%) These are music subscriptions to interactive services which negotiate royalty rates directly with record labels and artists. Rhapsody and Beats Music are examples.
• Ad-supported on-demand streaming: (+34%) This category refers to lean-back listening platforms that do not use statutory licenses. Such “freemium” services are often semi-interactive (not an official or legal term) and include some degree of on-demand music access. Spotify Free is the most recognized example; Rdio’s free-listening plan is another. (Important note: SoundExchange distributions (the first bullet here) also represent ad-supported revenue to a large extent, but can additionally represent subscription revenue [e.g. the Pandora One plan] and miscellaneously derived income such as donations.)

Rounding up all the digital numbers (downloads plus streaming), the digital side of the U.S. music industry grew 3.2% in 2014. The physical side (CDs, vinyl, DVDs, and other miscellany) dropped 6%. All forms of digital revenue represented 66% percent of the market at $4.5-billion.

According to the RIAA, the number of U.S. paid subscriptions to interactive music services is 7.7-million in 2014, up from 6.2-million in 2013. Music subscription revenue came to $799-million in 2014. Other streaming revenues (SoundExchange distributions plus on-demand free streaming), most of which is ad-supported, accounted for just over $1-billion.

(Note: The RIAA denotes “On-Demand Ad-Supported Streaming” to mean plans such as Spotify Free, which pay directly to labels, not through SoundExchange. But SoundExchange distributions represent ad-supported businesses also, the leading example being Pandora’s free service. RIAA terminology might imply that ad-derived revenue from streaming is lower than it really is.)