Music Industry Soars Into Year 3 of Recovery Thanks to Spotify

  • U.S. sales climb 17% in first half, spurred by subscriptions
  • Sony, Universal Music, Warner are key beneficiaries of upturn

The music business is booming again after nearly two decades of decline, thanks to paid streaming services Spotify and Apple Music, according to a report from the Recording Industry Association of America.

U.S. spending on music surged 17 percent to almost $4 billion in the first half of 2017, the RIAA said Wednesday. Streaming grew 48 percent, more than offsetting steep declines in online sales and more moderate decline in CD purchases, with consumers snapping up new works from Kendrick Lamar and Ed Sheeran, the two top artists of the first half.

The U.S. music industry -- led by label owners including Sony Corp., Vivendi SA’s Universal Music and Warner Music Group -- is poised to deliver its third straight year of growth, a first since the 1990s. That’s boosted the value of record labels and music publishers, convinced the world’s largest technology companies to invest more in music and led to a flurry of transactions for financiers eager to take part in the boom.

Record industry executives have cautioned against celebrating prematurely since sales are still a fraction of what they were at the peak of CD sales. Revenue from advertising-supported streaming on YouTube and Spotify is still minuscule, which the RIAA deems the “value gap.” While sales from paid subscriptions increased by at least $650 million, total revenue from ad-supported streaming amounted to just a fraction of that gain.

“Primarily owing to growth in paid subscriptions, the industry continued to recover, though at levels still far below the peak of the late 1990s,” Josh Friedlander, the RIAA’s senior vice president of strategic data analysis, said in the report.

Spotify and Apple Music have converted millions of people who bought singles and listened for free into paying subscribers. More than 30 million people in the U.S. paid for a music subscription, more than triple the sum in 2015.

Streaming accounted for 62 percent of total industry sales in the first half, which gives the dominant players, Spotify, Apple and YouTube, tremendous leverage with their label partners.

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