US Labels Say Music Sales Fell In 2012, But Streaming Services Anchoring Revenue

on in Industry News, International News


US Labels Say Music Sales Fell In 2012, But Streaming Services Anchoring Revenue

The latest figures in a report from the London-based International Federation of the Phonographic Industry (IFPI) had some very positive news for the music industry, demonstrating that global sales had undergone its first growth since 1999 (which just so happens to be when Napster launched), largely thanks to the influx of digital revenue, which was up by 9% at $16.5 billion in 2012.

The latest report from the Record Industry Association of America however, shows sales figures that are in direct contrast with the IFPI’s Digital Music Report, showing instead that music sales in the US fell in 2012, with streaming services being the only thing that keeps revenue afloat, with ‘Access Models’ like Spotify and YouTube making up 15% of the industry’s revenue.

The RIAA report demonstrates that in America, the music industry generated $7.1 billion in sales, and though the record body states the “revenues showed a second year of stabilisation relative to the steep declines of prior years,” the figures show a drop of 0.9% from 2011.

Despite the drop, industry revenue from digital formats continue to grow, and in the last twelve months topped $4 billion, a first for the industry, and up 14% from the previous year, while overall, digitally distributed formats made up 59% of the total US market by dollar value.

The digital growth is chiefly driven by what the RIAA report labels as “access models”, which it defines as services “where users can choose to listen from large libraries of music rather than purchasing individual songs or albums.” 

RIAA shows sales figures that are in direct contrast with the IFPI’s Digital Music Report, showing instead that music sales in the US fell in 2012…

Basically this includes the on-demand, subscription model based services like Spotify and Deezer, through to internet radio services like Pandora, but also video streaming titans YouTube and Vevo, which generate revenue through advertising.

It is the first time the RIAA has reported revenue from ad-supported models like Spotify’s free service, YouTube, and Vevo; a good thing considering that combined under the ‘access models’ umbrella banner, they made up 15% of the American music industry’s total revenue.

That 15% accounts for over $1 billion for 2012 and is a 6% leap from 2011′s figures, and five times that of the 3% they contributed in 2007.

The breakdown of money generated by specific services within these ‘access models’ isn’t clear, but does note that “revenues from subscription services and streaming services that do not fall under a statutory license were $570.8 million in 2012, up 58.9% from $359.2 million in 2011.”

The report also notes that the number of digital subscribers to paid on-demand services grew to the record high of 3.4 million, a significant contribution to the IFPI’s Digital Music Report figures that showed 20 million paying subscribers worldwide, a 44% rise on 2011, helping account for %10 of digital music revenues, while traditional download stores – like iTunes, Amazon, and Google and Microsoft’s recently launched services – represented approximately 70% of global digital revenues.

The RIAA reports that digital downloads of albums, singles, and videos were up 8.6% by value, from $2.6 billion last year to $2.9 billion in 2012. Of the digital sales, albums grew 12.5% to $1.2 billion, marking the second year where sales of digital albums exceeded 100 million to 116.7 million units. Single downloads also experienced growth from 2011, up 6.7% to $1.6 billion in revenue value.

Once again, physical sales continued to experience a moderate decline, from $3.4 billion in 2011 to $2.8 billion in 2012, a drop of 16.5%, while actual shipping of physical product like CDs and DVDs, was down at 11.7% but vinyl continues to be the dogged bastion of the physical format, following the general trend that its experiencing a revival with a growth in the US report to $163 million in 2012, up 36% from the previous year.

Vinyl also accounts for 2% of the market, which the report points out nearly equals the combined revenue from “ringtones, ringbacks, and other mobile products.”

The RIAA report concludes that the mix of digitally distributed formats is continuing to grow, marking not only the dominant part of the music industry (at 60% according to the report) but also becoming its largest earner when it comes to music sales, forming a significant contribution to the music industry.


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