• Streaming music accounted for $2.4 billion in sales last year
  • Record industry grew in 2015 for first time since 2011

Streaming generated $2.4 billion in U.S. music sales last year, surpassing digital downloads as the recording industry’s single biggest source of revenue and propelling the business to its first year of growth since 2011.

The listening format contributed 34.3 percent of sales, edging past digital downloads, which contributed 34 percent, according to a report by the Recording Industry Association of America released Tuesday. Overall sales climbed 0.9 percent to $7 billion.

Such growth, however slight, will fuel the music industry’s claim that streaming services like Spotify and Apple Inc.’s Apple Music will reverse decades of contraction and overtake digital stores like Apple’s iTunes. Revenue from digital albums declined 5.2 percent in 2015, while sales of singles declined 12.8 percent.

Paid streaming services accounted for half of overall streaming sales, as the number of paid music subscriptions grew to 13 million by the end of December, the RIAA said. The rest of the streaming revenue derives from online radio services owned by Pandora Media Inc. and Sirius XM Holdings Inc., as well as ad-supported streaming services offered by the likes of Google’s YouTube and Spotify.

Usage of ad-supported streaming is growing faster than sales from those services, the RIAA said, repeating the record labels’ push for Spotify and YouTube to convert more free users to paid subscribers. Spotify is the largest paid music service in the world with more than 30 million subscribers, but many still listen for free. YouTube, the most popular music service in the world, introduced a new paid service last year.

“We, and so many of our music community brethren, feel that some technology giants have been enriching themselves at the expense of the people who actually create the music,” Cary Sherman, chairman and chief executive officer of the RIAA, wrote in a blog post. “We call this the ‘value grab’ -- because some companies take advantage of outdated, market-distorting government rules and regulations to either pay below fair-market rates, or avoid paying for that music altogether.”

Spotify must negotiate new long-term deals with all three major record labels. The company’s agreements with two of them -- Vivendi SA’s Universal Music Group and Access Industries Holdings LLC’s Warner Music Group -- have expired. Labels and artists have asked Spotify to give artists more control over whether their music is available for free.

Taylor Swift only offered her most recent album in full via paid services while Adele declined to make her latest album available for on-demand listening on any music streaming services. She broke records in the process, furnishing another explanation for the annual increases in sales.

Adele’s “25” was the best-selling album of 2015, and has remained at near or the top of the sales charts since it went on sales in November. Overall sales rebounded to the level they reached in 2012, the last time Adele had the best-selling album of the year. She also had the best-selling album in 2011, the last year the industry grew.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE