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Streaming makes most of the US music industry's money now

For first time, more than half of US record sales came from streaming on services like Spotify, Apple Music or YouTube in 2016.

Mike Windle, Getty Images for iHeartMedia

If there were any doubts before, streaming is king now.

Revenue from streaming music accounted for the majority of US major record labels' sales for the first time ever last year, a music industry trade group said Thursday. Streaming vaulted over the one-time leader digital downloads, which declined faster than any previous year.

The data underscores the meteoric popularity of streaming tunes, which a year earlier barely eked past downloads to hold a roughly equal share of the US sales market.

In the last five years, consumers have quickly migrated from buying music outright to services where they pay all-you-can-eat subscriptions or listen free by sitting through advertising. The shift caused an outcry among some labels and artists, but opponents have lowered their volume more recently as the rise of streaming also spurred some of the industry's best sales growth in years.

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RIAA

But even as streaming has boosted the industry to some of its best growth in the 21st century, relatively low sales from ad-supported streaming have become the latest bone of contention among labels and artists.

"It makes no sense that it takes a thousand on-demand streams of a song for creators to earn $1 on YouTube, while services like Apple and Spotify pay creators $7 or more for those same streams," Cary Sherman, the chairman and the CEO of the Recording Industry Association of America, said in a blog post Thursday. "A platform like YouTube wrongly exploits legal loopholes to pay creators at rates well below the true value of music."

YouTube didn't immediately return a request for comment.

Overall last year, retail revenues from recorded music in the US grew 11.4 percent to $7.7 billion, the biggest gain since 1998, according to the RIAA. Even with such growth the industry is still licking its wounds from the last decade and a half -- sales remain about half what they were in 1999, the heyday of the CD.

Subscriptions, like the monthly fees for Apple Music or Spotify's paid tier, were the biggest money maker at $2.3 billion, and they basically doubled from a year earlier, the RIAA said.

That number doesn't count "limited tier" subscriptions, like Pandora Plus members who pay a monthly fee to remove advertising or Amazon Prime members who have some music streaming included. The industry banked another $220.3 million dollars last year from those limited paid memberships.

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RIAA

Online radio like Pandora or iHeartRadio was the second biggest source of streaming sales, growing about 10 percent to $883.9 million. Money from ad-supported streaming, like free listening on Spotify or music videos you watch on YouTube or Vevo, grew 25.8 percent to $469 million.

Meanwhile, download sales, like those typified by Apple's iTunes store, dropped 21.6 percent to $1.8 billion.

Although sales from both single tracks and albums fell, consumers are tending to download albums in full more than they ever have. Albums were 49 percent of the download total, their highest share ever.

Physical sales, which are predominantly CDs, continued to fall across all categories except for the retro outlier of vinyl records. Sales of LPs and EPs rose 1.8 percent.

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