Streaming Music Revenue Up 57% in U.S. in First Half of 2016

The latest figures from the Recording Industry Association of America show "massive growth" in paid subscriptions.

streaming music industry, RIAA, Spotify, Apple Music, Rhapsody, IFPI, music industry, recording industry

Paid subscription revenue for streaming music is up 57 percent in the first half of 2016 in the United States compared with a year ago, giving a lift to the music industry as it continues its transformation away from the sales of CDs, digital downloads and vinyl albums.

Streaming music revenue in the first half of 2016 totaled $1.6 billion in the U.S., compared with about $1.02 billion for the same period a year ago, according to a new report from the Recording Industry Association of America (RIAA).

The U.S. logged 18.3 million paid music streaming subscriptions in the first half of 2016, compared with 9.1 million in 2015 and 7.9 million in 2014, according to the RIAA. Each subscription can have multiple users, meaning the number of users could be substantially higher than those totals. Revenue is based on subscriptions and not on total users, however.

"For the first half of 2016, strong growth in revenues from subscription streaming services more than offset declines in unit-based sales of physical and digital music download products," including CDs, vinyl albums and digital downloads, the report stated. "Overall revenues at retail increased 8.1 percent on a year-over-year basis to $3.4 billion, the strongest industry growth since the late 1990s."

Joshua P. Friedlander, the senior vice president of strategic data analysis for the RIAA, told eWEEK that the migration toward streaming music from physical music formats has been occurring over the last several years.

"We have absolutely been seeing this trend, and I think we saw it accelerate in the first half of 2016," he said. "We saw the number of streaming music subscriptions explode. It was great to see it jump so much."

The growth in digital music subscriptions in the U.S. in the first half of 2016 follows two big developments in the streaming music industry—the June 2015 launch of the Apple Music streaming service, and the growth and pricing changes coming from streaming vendor Spotify.

"Not only did new services [including Apple Music and Tidal] come in, but the existing services grew as well," said Friedlander.

In June, Apple announced an all-new user interface for Apple Music that provided a new design to make it easier for users to navigate the service as they search for music. The Library, For You, Browse and Radio tabs inside Apple Music were all redesigned for ease of use, while a new Search tab has been added to make it easier to find music. Also new is the addition of visible lyrics when listening in Apple Music. The changes are aimed at helping Apple further increase the user base of its Apple Music subscription service, which had about 15 million users as of June.

Apple Music was launched in June 2015 as the company dove into the growing streaming-music market with a $9.99-a-month service that aimed to take on established competitors, such as Spotify, Rhapsody and Pandora. A family membership for up to six users is $14.99 a month. About 10 million users signed up in the first six months, but the service didn't grow as much as Apple had expected.

In May, Spotify dropped the price of its Spotify Family Plan premium music-streaming services to $14.99 for up to six family members, saving a family of six about $20 per month over its former rates. The music-streaming company unveiled its lower prices to replace its old pricing structure of $9.99 for the first user and $5 each for each additional user for family members. The new Spotify Family Plan rate puts the service on par with Apple Music.

The streaming music marketplace has been a busy place in recent months. Earlier in June, music-streaming service Rhapsody, which bought the assets of Napster back in 2011 and uses the Napster name elsewhere around the world, announced that it will soon be changing its name to Napster in the United States. The change, which will not affect users' playlists, favorites, albums and artist selections, is being made to enable the company to use the Napster name in the United States as it does in all other non-U.S. markets as it forms one global brand.

Rhapsody/Napster is also going through a restructuring that is bringing about layoffs of an undisclosed number of employees around the world. Rhapsody offers a three-month trial for $1 and then charges $9.99 a month for its paid ad-free music-streaming services.

In April, a report by the IFPI, a London-based international trade body for the recording industry, found that music sales around the world continued to change dramatically in 2015, with 45 percent of global music sales coming in for digital music, compared with 39 percent of sales from old-fashioned CDs, vinyl albums and other formats. The report also found that global music revenues increased overall by 3.2 percent in 2015, largely fueled by the growth in digital streaming music sales. According to the IFPI, 2015 marked the first time that digital music "became the primary revenue stream for recorded music, overtaking sales of physical formats," the study reported.