Music Streaming Overtakes Physical Sales for the First Time

The global music industry soared a record 8.1 percent last year as digital sales for the first time made up the majority of revenue thanks to the streaming boom, the industry said Tuesday.

Recorded music grossed $17.3 billion (roughly Rs. 1.13 lakh crores) in 2017 with digital music - until last year roughly equal to physical sales worldwide - amounting to 54 percent of the revenue, the IFPI global body said in its annual report.

Online streaming services such as Spotify, Deezer and Apple Music have become the music industry's single biggest revenue source, overtaking physical sales and digital downloads for the first time. Last year, subscription-based streaming revenue accounted for 38 percent of all recorded music, up from 29 percent the year before, IFPI said.

The report said that 176 million people around the world paid for streaming subscriptions by the end of last year, with 64 million joining throughout the year - and there is plenty of room to grow on a global level.

The growth marks the third consecutive year of expansion and the fastest pace since the International Federation of the Phonographic Industry (IFPI), began compiling data, the group's CEO Frances Moore told reporters on a conference call.

But the industry still is only worth about two-thirds of its value in the 1990s before the rise of the internet and the scourge of pirated music sent the music business into a 15-year slump, Moore said.

Physical sales tumbled again but one bright side was vinyl, which remains a sliver of the market but grew 22.3 percent as records find a renewed market among audiophiles.

Stu Bergen, the CEO for international and global commercial services at the Warner Music Group, warned that the music industry should not become "complacent" and pledged that record labels would invest their revenue to develop new talent.

"We've fought too hard to get here and, after 15 years of decline, there's still plenty of room to grow," Bergen said on the conference call.

Spotify keeps expanding
The IFPI released its data hours before Spotify announced a major expansion of its free, advertising-backed level, which the Swedish company sees as crucial to its hopes of making streaming universal, especially in emerging economies.

The industry voiced guarded optimism about China, where revenue jumped 35.3 percent as international labels increasingly penetrate the billion-plus market.

The growth, however, comes from a small base, with China only the 10th largest music market.

In one point of concern, Japan - the world's second-largest music market - saw revenue decline by three percent.

The slump was paradoxically due to the continued strength of CD sales in Japan, where physical music makes up 72 percent of the market, with digital revenue not providing the same injection of growth as elsewhere.

"It's just a question of time. It's a traditional society and the move toward digital is slower than in some countries," Moore said.

Latin America saw the biggest growth among regions.

Revenue there jumped 17.7 percent on the back of streaming and particularly strong showings in Brazil, Chile and Peru.

The report, however, warned that more needed to be done to reach Latin American music consumers who lack credit cards - generally a requirement to subscribe to streaming services.

The IFPI also repeated its longstanding complaints about a structural "value gap" that allows YouTube to pay less back to artists, owing in part to laws in the United States that shield internet companies from responsibility for content uploaded by users.

The report estimated that record companies earned $20 (roughly Rs. 1,300) per year from each Spotify user, while YouTube, owned by search engine giant Google, paid less than $1.

"We can't deliver the path to recovery alone. There is a structural fault in the market," Moore said.

Despite the industry's efforts to expand in emerging economies, the top 10 most popular artists of 2017 were all Western, led by English singer-songwriter Ed Sheeran.