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After years of decline, digital streaming is saving the music industry

Peter Nowak | posted Tuesday, Apr 4th, 2017

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Streaming is turning out to be a bonanza for the music industry, if the latest numbers from the Recording Industry Association of America are to believed.

Total U.S. retail sales hit $7.7 billion (U.S.) in 2016, representing 11.4% year-over-year growth – the largest single-year gain for the industry in almost two decades. The majority of that growth came from streaming services such as Spotify and Apple Music, which now provide more than 50% of the industry’s revenue.

Music streaming overall, including free services, saw 68% growth last year compared with the year before. Subscription services did even better, with revenue improving by 114% to $2.5 billion.

The results go a long way to fulfilling the promise that the likes of Spotify have been making for years – that, given enough time and scale, streaming can be even more lucrative to the music industry than their previous distribution systems.

Anecdotally, when I think of my own music purchasing habits in the past and present, I can see how this makes total sense.

Prior to the Napster revolution many years ago, when I was a young lad who was very much into music, I’d buy a handful of CDs a year. Maybe four or five, which might run to $60 a year.

File-sharing came along and offered up anything and everything anyone could want, so forget about buying discs. But there were problems with the free music revolution, and no, we’re not talking about the legality. No one really cared about that.

The issue with Napster and then BitTorrent after it was that you still had to proactively download what you wanted. It took work.

Spotify and its kin now deliver a simple proposition – the same, virtually unlimited choice, pretty much wherever and whenever you want it, but for a relatively low fee.

They’ve taken the work out, so no wonder so many people are signing up. Spotify alone has 50 million paying customers, while Apple Music reports 20 million.

The kicker in my situation, and probably for many people, is that I’m actually paying more for music now than I ever did. At $10 a month, Spotify is costing me $120 a year, easily double what I spent even in my heyday of music consumption.

The difference, of course, is that we’re getting far more in exchange. The success of streaming services thus comes down to a few basic factors that were simply missing from the business in years past: convenience and value for money, which is evidently succeeding. What a novel development.

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