Credit: Jason Persse

Is streaming good for the music industry?

Revenue from streaming music has overtaken digital downloads in the US for the first time.

by Rebecca Smith
Last Updated: 24 May 2016

Jay Z’s Tidal might be struggling to crack the streaming market, but its wider popularity is showing no sign of abating. In fact, according to the Recording Industry Association of America, streaming music services have displaced digital downloads as the largest source of revenue in the music industry’s biggest market.

US revenues from the likes of Spotify, Apple Music and Pandora grew 29% in 2015 to $2.41bn (£1.7bn), accounting for 34.3% of total industry revenues. It was the first time total streaming revenues passed $2bn as every segment of the market grew.  It was also good news for the music industry as a whole – after declining in 2014, it grew again last year, selling $7bn worth of music (inching up 0.9% from the year before).

Paid subscription services are the largest and fastest-growing part of the market; the number of paying subscribers to streaming services rose 40% to 10.8m last year. The most popular artists on Spotify were Drake, The Weeknd, Kanye West, Ed Sheeran and Eminem.

While some might be concerned that the declines in digital downloads and physical sales (both dropped 10% to $2.3bn and $2bn) are signalling a turbulent time for the music industry, it could be more accurate to view it as part of a wider change.

Take the sharing economy. The now familiar names of Airbnb and Uber have transformed how we view accommodation and transportation – it’s not a stretch to predict that the future of consumption could well be all about renting and transience, rather than buying and more permanent decisions. Choice for consumers has always been important, but we’re seeing more emphasis placed on how and when these choices are made too – the rise of on-demand TV is a prime example of that.

Fundamentally, Spotify and other streaming services have taken off so rapidly because there's consumer appetite for them. So they're popular with the people, but as with Uber and co, not everyone's happy with the rise of streaming. Notably some artists who dislike the fact that revenues for those creating the music aren't increasing in line with the rising consumption of music.

Tidal has been trying to tweak this, to cater for streaming fans while evening up what artists make from the arrangement. It's looking likely though that we're in the midst of a change that even the mighty Jay Z will find tricky to stop.

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