On-Demand Audio Streaming Grew 103% Last Year…

Last year was the first year ever that digital downloads declined.  Now we have a better idea why: according to data just shared with Digital Music News by Nielsen Soundscan, on-demand audio streaming gained 103 percent in 2013 (ie, more than doubled).  Overall, on-demand streaming (audio+video) grew 32%, according to the dataset.

Paid downloads, mostly delivered by iTunes and Amazon, dropped 6%, while digital albums were completely flat.  That’s the first year that has happened, ever.

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Written while listening to Cold War Kids.

37 Responses

  1. Anonymous

    When Time brought a variation of this story last week (minus the 103% streaming gain), they added the interesting fact that p2p piracy dropped from 31% of total North American web traffic five years ago to less than 10% today.

    So the discussion is over. Streaming is indeed the enemy.

    The good news is that the cannibalization ratio finally begins to emerge:

    When your song is streamed 100 times on Spotify, you lose 6 sales.

    Ouch. 🙁

    • GGG

      Wait, so you’re saying DLs went down because of streaming, but piracy dropped…NOT because of streaming?

      • Yves Villeneuve

        Piracy dropped because nearly everyone have downloaded what they wanted. When you’ve downloaded most of what was already available there is little need for piracy in order to stay up to date with new releases. It’s basic math.

        • GGG

          Do you have any idea how much music is still put out? Look through any torrent sites’ Top 100 DLs. 95% of it is albums that came out within the last one-two years, and a few legacy artist discographys.

          • Yves Villeneuve

            Back catalog extends at least 60 years and you are talking about recent 2 years? It’s basic math. 58 vs 2. 58 years have already been downloaded. Pirates are trying to stay up to date with the last two years worth of content, as per your testimony.

            Listen GGG, I know you will never admit to being wrong on this so I won’t waste my time to keep explaining basic math.

          • GGG

            You’re presuming that every pirate cares about the entire history of music. What a stupid assumption.

        • Anonymous

          Well, we all have our theories.

          What we know is that streaming is up by 100%, while sales are down by 6%.

          Let’s take it from there.

          • GGG

            Yes and (to copy/paste a response of mine in another thread) there’s two different issues here. Can it make up for sales on the whole for the industry and can it make up on an artist by artist basis. Important distinction, specifically based on the long-tail discussion. Because for the former, I think it does by a long shot. The latter is where you’ll see issues for people until streaming is more normalized, because you’ll get a smaller batch of hits/classics responsible for a huge percentage of plays, i.e. the long tail is shit out of luck for the time being.

            So 80M singles lost, or about $90M gross (avging out .99 and 1.29 tracks), would take about 15B streams at a .006/stream payout. Spotfiy says they had 4.5B listening hours, or 270B minutes, this year. Let’s say an avg song is 3.5 mins, minus commercial time, carry the one, divide by pi, that’s….quite a bit more than 15B streams.

            And that’s JUST Spotify. No YouTube, no Deezer, no Rhapdosy, no nothing else.

          • Anonymous

            Sorry, you already lost me at ‘divide by pi’ the first time. 🙁

            I’m sure you have a point somewhere, but does it change the Streaming-up-by-100-Sales-down-by-6 scenario?

          • GGG

            It was a joke since 270B divided 3.5 is clearly more than 15B.

            Anyway, yes, the point is that an increase in Spotify’s streaming (I know this article covers everything so I’m not using the 103% figure) made rights holders a substantially larger amount of money than they lost in digital sales.

            The unfortunate part is obviously smaller acts while streaming is still fairly small, but I don’t see any reason why the rising tide wouldn’t lift all boats.

          • Anonymous

            I don’t see any rising tide — but I see a lot of penny rivers.

            So there are two ways for a musician to make money from streaming:

            Start a streaming site or buy shares in a major label.

          • GGG

            Or we can focus on growing streaming numbers so we don’t wallow in this fucking purgatory of shit sales AND shit stream payouts for the rest of our lives? If we want to make money on recorded music again we’re going to have to tilt the scale a little more and we’ve been trying to tilt it in the direction of DLs for a decade+ now. Hasn’t worked yet, so unless you’re hiding some grand idea up your sleeve, I think we should start putting more focus elsewhere.

          • Yves Villeneuve

            I prefer to think in absolute numbers since there is a large difference in revenues between the download and on-demand streaming markets.

            In 2013, downloads declined by $80mm while on-demand streaming increased by $183mm. CDs decreased by $367mm. Don’t know yet what happened to SoundExchange revenues with the launch of iTunes Radio late in the 3rd quarter.

          • Casey

            Considering iTunes radio doesn’t pay Sound Exchange, probably not much.

          • Yves Villeneuve

            You’re right in that iTunes Radio pays labels/publishers their share but SoundExchange still pays the artists unless the label guaranteed the minimum SoundExchange rate to artists.

            In any event, I should have said we don’t know yet Internet radio revenues for 2013 since the launch of iTunes Radio with direct deals with labels, which may change RIAA category classifications in the 2013 report released sometime in 2014.

            It’s too bad the RIAA will avoid revealing annual number of streams for each category showing how many subscribers are inactive but subscribed or are ad-supported. They report number of units sold/shipped but not units streamed to hide the failures and deceptions of the latter.

          • fact check

            Apple does not pay SoundExchange for songs played on iTunes Radio. Therefore, SoundExchange will not be paying any artist for songs played on iTunes Radio. That is the benefit of doing direct deals. The streaming service only has to pay the recording rights owner and the publishing rights owner pursuant to terms of their streaming rights agreement. Please re-read whatever gave you the impression that SoundExchange will pay artists directly for “their share” in situations where private agreements exist for streaming. SE won’t pay any artist for iTunes Radio play because SE does NOT get paid by the service because SE is not entitled to get paid by the service.

          • Yves Villeneuve

            Triple check your facts. iTunes Radio cannot offer less than SoundExchange rates to labels unless there are guarantees the music with direct deals get played more than those that do not. Why would labels and artists negotiate a bad deal for themselves when they can simply fall back on the SoundExchange rates.

            By the way, SoundExchange makes payments to three separate parties: labels (50% share), artists (45%) and session musicians (5%). Labels do not negotiate on behalf of artists and session musicians but may collect on their behalf if they receive the same rates as labels and are higher than the SoundExchange rate. SoundExchange is mandated to collect the SoundExchange rate only.

            I am aware you are a Pandora shill who wastes no time to elevate your vested interests in this company. Are you working for Pandora, an institutional investor/analyst or hedge fund manager?

          • Anonymous

            No Yves, s/he is right. iTunes radio does not meet the licensing requirements for Sound Exchange and therefore it is completely out of Sound Exchange’s control. They do not collect any royalties from iTunes radio, whatsoever, as the service uses direct licensing. The labels actually negotiated an awesome deal. Unlike in the case of Pandora, the labels take home everything. Apple leaves it up to the labels to distribute money to the artists… but we all know how that goes.

      • Anonymous

        You don’t think all the anti-piracy initiatives, laws, blockings, education, etc. have any effect?

        I’m pretty sure the threat of astronomical fines would affect me, if I were pirating.

        • GGG

          Probably some. But the threat of astronomical fines has been around for years and years and it didn’t stop anyone. In fact, it GREW while single moms were getting hit with 6 figure fines.

          Look, I get it, you don’t like streaming, fine. But to sit there and praise every stupid thing you can come up with for killing piracy except the most obvious is ridiculous.

          • Anonymous

            “it GREW while single moms were getting hit with 6 figure fines”

            Jammie Thomas-Rasset wasn’t ‘hit’ by anything. If anything, she hit herself in the head — wham! — after dismissing several attempts from the recording industry to help her off the hook.

            And a lot of pirates continued to believe she’d win until she finally lost everything in September 2012. So that’s when the effect really took off.

          • GGG

            Oh ok. So a verdict that probably .0000001% of people in the world saw/cared about killed piracy, but certainly not at all the launch of Spotify in the US a year prior to that. Gotcha!

          • Anonymous

            The operative word being ‘probably’…

            I don’t think streaming stops piracy. See how people respond to free music on YouTube: They download the videos illegally. 🙂 I mean, it’s nuts…

            Operative word being ‘think’, of course…

          • GGG

            There was a thread on the front page of reddit with thousands of up votes (agreements, basically) in November maybe, explicitly stating how streaming had taken away their desire/need to pirate. Statistically small sample in the grand scheme of worldwide piracy, but certainly a lot more than nothing. And this is Reddit, one of the homes of the stupid/fringe get rid of copyright movement. If it’s changing behavior there it can work elsewhere.

            Also, who downloads videos off of youtube? Or do you mean people who put them on there illegally?

          • Anonymous

            Well, we can discuss the streaming/piracy relationship forever…

            As for YouTube downloads: Google, er… YouTube downloads/YouTube downloader/YouTube MP3.

            Equally interesting/depressing: Google Spotify downloader…

          • GGG

            So the argument is that web traffic to pirate sites dropped to 10% but everyone just started downloading stuff off YouTube rather than just stream stuff there or on Spotify? So Pirate A was like “hmm, I’m suddenly scared to download off pirate bay, so I guess I’ll go through a greater hassle to steal shit instead of using this free easy to use service?”

          • Anonymous

            What I’m saying is that people seem to steal because they think it’s fun. No amount of streaming is ever going to stop that.

            And it’s not a hassle to download/copy from YouTube or Spotify, never was.

          • GGG

            C’mon man, now you’re really stretching. Stealing because it’s fun? Bahahah. “Sorry man, can’t go to the bar tonight, gonna stay home and download music! YEA!”

            People steal because they want stuff they can’t afford and/or just don’t want to pay for. And in this case, because it’s very easy and still essentially has no real threat of personal consequence. Simple as that.

    • Me

      “When your song is streamed 100 times on Spotify, you lose 6 sales.”

      WTF? What kind of math are you doing here?

    • TuneHunter

      All of this hoopla leads to just 35 billion MUSIC SWAMP in 2025.
      Pretty shitty outcome to arrive at 40% of inflation adjusted 1999!

      We have 100B of music around us and we can be there before 2020 monetizing at the discovery moment.
      ALL including Spoofy, Google and Shazams will at least double MUSIC INCOME.

      Current labels are in permanent anesthesia so it doesn’t matter if they quadruple.
      Time for YouTube to become a label and drive the business!

    • Visitor

      When your song is streamed 100 times on Spotify, you make 50 cent.

    • hippydog

      As we saw with digital VS physical sales, the true cannibalization happens later..

  2. Yves Villeneuve

    I see what you did there.

    However, +32% (2013) vs +59% (2012); decline of 45% in growth, that’s never happened before.

  3. Omg

    Oh my god the apocalypse is coming!!! Tell us something we don’t know without some super dramatic stance, even when paid downloads were growing many musicians weren’t making shit and the indie market frankly gives us only 10 or so % relevant artists while the rest refer to themselves as the next great thing just because they touched a guitar at guitar center … Streaming is here forever because teens, moms and grandmothers will find it easier than buying a cd or a download.

  4. hippydog

    I dont think we can state any type of real ratio yet on the cannibalization of digital sales VS streaming..

    as we learned with digital VS physical, as the ‘newer’ format comes in it doesn’t seem to cannibalize as much until it becomes more ‘status quo’.. (IE: people are sometimes ‘buying twice’ until they fully accept the new consumption model). and to repeat myself, I think we have more then enough evidence that cannibalization has happened.

    The biggest selling point for streaming is its ability to pull from the “piracy format”.. for me the BIG question is will it be enough to compensate for its very low payouts..
    IE: Streaming WILL cannibalize digital but can also cannibalize piracy, but will it be enough to compensate?

  5. TuneHunter

    Very discouraging news.
    500% would be proper number considering all new participants like Google, Apple or Sony.
    We have to add Deezer and Spoty new geographical zones.
    Wrong business model – subscription and advertising is just not enough for on demand delivery of any wish!
    Monetization at the discovery moment at moderate price is the only hope for creators and all those avangard
    saviors of the industry.