Record Companies' U.S. Revenue Up 8.1% in First Half of 2016
September 20 2016 - 7:30PM
Dow Jones News
The record business finally is seeing growth that it can sing
about, thanks to a huge jump in music streaming.
Record companies' U.S. revenues reached $3.4 billion in the
first half of 2016, an 8.1% increase from the same period a year
earlier, according to the Recording Industry Association of
America. The growth was the industry's strongest since the CD boom
of the late 1990s.
Fueling the increase were subscription services, such as Spotify
AB and Apple Inc.'s Apple Music, which offer unlimited access to 40
million-song catalogs for $10 a month. Domestic revenues from those
services more than doubled to over $1 billion in the first six
months of 2016, and their combined U.S. subscriber base doubled to
18.3 million paying customers. Streaming services both free and
paid generated $1.6 billion, about half of the industry's total
revenues.
Spotify counts 40 million paying subscribers world-wide, while
Apple has 17 million subscribers globally, most of them in the U.S.
Because Apple Music launched in June 2015, it didn't generate any
streaming revenue in the first six months of last year, partly
accounting for the sharp streaming increase in the first six months
of this year.
The streaming boom easily offset steep, continuing declines in
sales of CDs and digital downloads. Revenue from CD sales fell more
than 16%, while revenue from digital singles dropped nearly 22%.
Vinyl sales fell 6.3% to $207 million on 8.4 million records,
though in dollar terms that represented a sizable chunk—about
one-third—of the total $632 million in physical music sales.
Cary Sherman, chairman and chief executive of the RIAA, said in
a blog post that the results represent "a remarkable transformation
and reinvention by a business that was principally physical
products just six years ago."
But Mr. Sherman added that the industry should be reaping much
more, calling for lawmakers to reform laws that protect websites,
such as Alphabet Inc.'s YouTube, from liability when their users
upload music without permission from rights holders.
"Despite the massive consumer demand for music, the damning
reality remains that music is fundamentally undervalued, with
broken, outdated laws threatening the entire music community and
distorting the marketplace," he said, adding that many services
"rake in billions of dollars for themselves on the backs of music's
popularity but pay only relative pennies."
Representatives of Alphabet didn't immediately respond to a
request for comment.
As music revenues rise faster, though, Nielsen Music analyst
Dave Bakula said it is becoming "a little tricky" to be saying "we
should be doing so much better."
Mr. Bakula said he thinks the growth is "very sustainable" for
the foreseeable future as the consumers who were first to buy
digital music quickly start streaming instead. Meantime, music
streamers are spending more time on the services, showing increased
engagement with music that is likely to result in increased
spending on nonstreaming music products, such as vinyl records and
boxed sets, he added.
New subscription music services also could help sustain growth,
said James Donio, president of the Music Business Association.
Internet radio company Pandora Media Inc. launched a new version of
its $5-a-month ad-free service last week and plans to launch a
$10-a-month on-demand service later this year, while Amazon.com
Inc. is also planning a new subscription offering.
"We are even more optimistic that the second half of 2016 will
continue these positive trends," Mr. Donio said.
Write to Hannah Karp at hannah.karp@wsj.com
(END) Dow Jones Newswires
September 20, 2016 19:15 ET (23:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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