US music fans throw more money at vinyl, CDs than iTunes downloads now

Streaming is king though, bringing in 75 percent of the US recording industry's revenue.

Joan E. Solsman Former Senior Reporter
Joan E. Solsman was CNET's senior media reporter, covering the intersection of entertainment and technology. She's reported from locations spanning from Disneyland to Serbian refugee camps, and she previously wrote for Dow Jones Newswires and The Wall Street Journal. She bikes to get almost everywhere and has been doored only once.
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Joan E. Solsman
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How the mighty have fallen. Digital downloads, typified by the 99 cent iTunes tracks that ruled the music industry as recently as four years ago, now make less money for US labels than CDs and vinyl records

Downloads represented just 11 percent of US labels' revenue last year, a music industry trade group said Thursday. Physical sales -- the term for music formats you can actually hold, which are mostly CDs and vinyl at this point -- booked 12 percent. Instead, streaming music has been asphyxiating demand for downloads. Streaming sales were 75 percent of revenue last year, according to year-end data from the Recording Industry Association of America, or RIAA. 

It wasn't that long ago that digital downloads and streaming stood on equal footing. In 2015, downloads and streaming each accounted for about 34 percent of the music industry's sales. But as streaming has shot up in popularity, the music industry's overall fortunes have soared: Total sales have increased 40 percent in those three years that streaming has overtaken downloads. 

Watch this: Apple Music vs. Spotify: Music streaming battle

It underscores the meteoric popularity of streaming, which has spurred a larger, cultural shift in consumers' relationship with their music. Rather than buying music outright, like we did in the era of CDs and downloads, people are increasingly paying monthly fees for all-you-can-access tunes on services like Spotify or Apple Music or listening free by sitting through advertising on sites like YouTube. Though the shift caused an outcry among some labels and artists, the growth of subscriptions has fueled the music industry's best sales growth in years.

Overall last year, retail revenues from recorded music in the US grew about 12 percent, to $9.85 billion.

Subscriptions, like the monthly fees for Apple Music or Spotify's paid tier, were the biggest moneymaker, at $4.66 billion, up 33 percent, the RIAA said.

That number doesn't count "limited tier" subscriptions, like Pandora Plus, where members pay a monthly fee to remove advertising, or Amazon Prime , where members have some music streaming included. The industry banked another $747.1 million dollars last year from those limited paid memberships, up 26 percent.

Money from ad-supported streaming, like free listening on Spotify or music videos you watch on YouTube or Vevo, grew 15 percent to $759.5 million. (Online radio was the second biggest source of streaming sales, at $952.8 million.)

Meanwhile, download sales dropped 26 percent to $1.04 billion.

Physical sales slid less, falling 23 percent to $1.15 billion. Vinyl, continuing its trend, was the lone format slowing the decline -- vinyl record sales were up 7.9 percent, at $419.2 million.