Revenue from paid downloads is falling faster than anyone anticipated.
According to PwC projected figures shared with Digital Music News, revenue from physical formats is falling at a (compound annual) rate of —12.3%. That’s a drop from $1.8 billion in 2015 to just under $1 billion in 2020. But that’s nothing compared to paid download: according to the forecasted figures, paid music downloads will fall at a (compound annual) rate of —14.3%, from $2.3 billion in 2015 to just over $1 billion in 2020.
These projections suggest that by 2020, the revenue that paid downloads and physical music generate for the music business will be nearly neck-and-neck.
DMN has plotted the revenue from 2012 to 2015, as well as the projected revenue from 2016 to 2020 as per PwC’s forecast. And what’s clear is that the ‘revenue gap’ between paid downloads and physical is reducing dramatically year-on-year.
Downloads replaced CDs, but is streaming replacing everything?
Of course, as digital downloads increased, physical sales decreased. But now, paid digital downloads are declining precipitously after a relatively short-lived ascent. Revenue from paid downloads in the US is predicted to fall from $2.3 billion in 2015 to just over $1 billion by 2020.
That means that revenue from paid downloads will be sliced in half in just 5 years.
Music Market in US (US $ in billions)
Why?
What’s interesting here is that Spotify launched in the US in July of 2011, giving music consumers the option to listen to millions of songs legally through the free ad-supported tier. With that, we saw a mass movement away from illegal sites, but we also saw a massive decline in paid downloads in the following year (and every year after). After all, why would music consumers pay for a download when they can listen for free?
In recent years, the drop has been less severe: according to the figures, paid download revenue fell from $2.87 billion in 2012 to $2.32 billion in 2015. PwC also predicts that paid downloads will fall as low as $1.07 billion in 2020, a quick return to the all-important billion-dollar threshold.
But the PwC figures also show a simple correlation: as streaming revenues increase, revenue from paid downloads, mobile music and physical formats decline. This is not to say that the rise of streaming is the only factor affecting these revenue streams for the US music industry. But there are definitely reports that provide strong data showing that free streaming services have negatively impacted paid downloads. These PwC figures also support this notion.
Add the rumors of Apple eliminating music downloads from iTunes in as little as 2-3 years, and that drop could be more severe. Meanwhile — here in 2016 — streaming is already the biggest single revenue generator for the US recording industry, and one of the only increasing forms music consumption alongside live music and vinyl.
(Image by Henry Burrows, Creative Commons, Attribution-ShareAlike 2.0 Generic, CC by-sa 2.0)
Welcome to Music STREAMING Concentration Camp!
$200B of annual music goodwill OBVIOUS to Morocco goat trader converted to
$15B of subs and ads hopefully if all work really hard by 2025.
Apple, Google, Amazon, Spotify all on board executing UMG designed music suicide!
Music NERD LAND full steam to streaming NIRVANA.
Will you please shut up already? Nobody’s listening to you. Spotify FOREVER!!!
Did you aver make any money on your own? Wherever you’re and whoever you’re open a farm market stand and work it for a year.
Then take a look at your OPM (other people money (& goods)) Ek and hard working hopeless music creators!
YOU WILL HAVE MUCH SMARTER PERSPECTIVE ON LIFE AND BUSINESS.
Stop living in the past, man. The future is streaming. I know it, he knows it, they know it, and YOU know it. S P O T I F Y
Welcome to Music STREAMING Concentration Camp!
yes compare music streaming to killing millions of people.
if you said that here in tel aviv you would be leaving with police protection in an ambulance.
Cool rollercoaster pic.
I totally agree!
Streaming is the only way to go, also for Radio or TV.
The problem we have is all inclusive streaming with free tune discovery, song ID.
The best future for music industry is sub and ad free streaming where they play the best they can and charge for ADDITION TO YOUR PERSONAL PLAYLIST.
haha stupid artists you make McMusic and still feel we should pay you…..
stop the auto tune, cut and pasting, make live albums, show your chops without any funny stuff
i will pay but you have to be good
Streaming works well enough for me.
if you are a consumer, YES. For creators needs immediate REWORK!
Turbo Napster is unfair.
You know how to get people to buy music .. just put a 90 seconds preview on YouTube.
I was wanting to hear the original version of “This Is What You Came For” (Calvin Harris) and on the artists official YouTube channel there was a 90 seconds preview..
There were loads of covers but I wanted to hear the original.. in full …
So I went to iTunes and purchased the full track for AUS$2.19 and the lesson here is if you don’t give it away for free then people will buy the song from stores like iTunes, just like I did.
I think YouTube is a great promotional vehicle and to use it for 90 seconds previews just like how iTunes has a 90 seconds preview is the way to go..
Otherwise you are going to cannibalize your sales..
Promotional and discovery TOOL – YES – with just little change! Still, once you know the name of the tune you can steal from anywhere – the web reality!
So YouTube is really incurable for music. Honestly we do not need it it delivers less than 1% of music to mankind ears but keeps all the music in the open as free jukebox with access to everything!
Labels need transplant of gigantic balls to SAY NO to Google streaming music on the tubes into the tubes and START HARVEST of 99% of music that comes to humans from unrelated to Google sources.
Vivendi, get some medical help for your UMG boys! They are the creators and executors of MUSIC SUICIDE for last 8 years.
Mr. Grainge just became Sir Lucian Charles Grainge!
Now he should be able to knock on Google’s door!