FM’s Biggest Competitor Is RIAA’s Biggest Revenue Maker


How important are such services as Pandora, Spotify, and TIDAL to the music industry?

If not for them, revenue for the record labels and imprints responsible for the tunes you’re hearing would be far less than the already diminished dollars the RIAA is seeking compared to the end of the 1990s.

It paints a picture that explains why efforts on Capitol Hill, thus far unsuccessful, to introduce new fees on broadcast radio for the airplay of recorded music were seen this year. Simply put, the recording industry’s run out of ways to make money from the sale of singles and albums.

In the first half of 2017, growth in revenue from music subscription streaming services continued to offset declines in traditional unit based sales.

Estimated retail revenues from recorded music in the U.S. grew 17% in the first half of 2017, to $4 billion. At wholesale value, the industry was up 14.6% to $2.7 billion.

But, the RIAA points out, this growth reflects a continuation of the trends from 2016 — and overall market revenues “are still significantly below the levels they were in 1999.”

If it wasn’t for streaming, the RIAA would be in real trouble.

Revenue from streaming music services accounted for 62% of the total market for the first half of 2017.

Total revenue from streaming platforms was up 48%, to $2.5 billion. The streaming category includes revenue from subscription services (such as paid versions of Spotify, TIDAL, and Apple Music, among others), digital and customized radio servicPes including those revenues distributed by SoundExchange (like Pandora, SiriusXM, and other internet
radio), and ad-supported on-demand streaming services such as YouTube, Vevo and ad-supported Spotify.

Physical recorded music sales comprise 16% of the total market for the first half of 2017. Downloads represent just 19% of the market.

In fact, paid subscriptions were the biggest driver of RIAA growth in the first six months of 2017.

Revenues from paid subscription services grew 61% to $1.7 billion at estimated retail
value, and were the largest format in the U.S., accounting for 43% of total revenue.

This growth was driven by continued strong user increases. The number of paid subscriptions reached a record high 30 million averaged for the first half of the year. This represents growth of nearly 1 million new subscriptions per month as compared to the prior year.

It sheds new light on efforts on Capitol Hill to bring new royalty fee structures to broadcast radio, including the Fair Play Fair Pay Act and the PROMOTE Act

As of Sept. 20, the “Fair Play” Act — H.R. 1836 — now has 24 co-sponsors. The newest co-sponsors are California Democrat Brad Sherman and Tennessee Democrat Jim Cooper.

The legislation amends federal copyright law to extend a sound recording copyright owner’s rights to include the exclusive right to perform or authorize the performance of the recording publicly by means of any audio transmission, thereby requiring terrestrial AM/FM broadcast radio stations that play copyrighted sound recordings to pay royalties for the nondigital audio transmissions of the recordings.

The “PROMOTE Act,” or H.R. 1914, has failed to attract more than two supporters: Author Darrell Issa (R-Calif.) and Rep. Ted Deutch (D-Fla.).

Where does streaming audio for broadcast radio stations come in to play?

The RIAA notes that while SoundExchange distributions decreased 16% in the first half of the year, when direct payments from digital radio services are included, total revenue from
digital radio services was up 21%, to $493 million.

This is helping to offset the continued descent of physical product sales — even as vinyl sales have regained strength as audiophiles have brought renewed interest to the mode of listening.

The total value of shipments of physical products slipped by 1%, to $632 million, in the first six months of ’17. RIAA says that’s a much lower rate of decrease than recent historical trends.

Also, the rate of returns of physical goods to record labels decreased in the first half of the year, helping bolster the revenue figures.

Still, revenues from shipments of the fading Compact Disc were down 3%, to $431 million, while vinyl albums were up 3%, to $182 million.

Vinyl albums comprised 29% of total physical shipments at retail value – their highest share since the mid-1980s.

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