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Streaming Subscriptions Are Now a Billion-Dollar Business, but Music Sales Stall

Twenty-eight million people are paying for subscription services like Spotify.

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Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

Music subscription services have been around for a long time. Now they’re finally a real business: Companies like Spotify, Deezer and even Google generated more than $1.1 billion in music subscription revenue last year.

But the global music industry, which had finally perked up last year after a decade-plus slide, drooped again.

Worldwide wholesale revenue declined 3.9 percent, to $15 billion, in 2013, according to the music trade group International Federation for the Phonographic Industry. Much of that drop comes from Japan, where sales plummeted nearly 17 percent. If you strip out Japan’s results, sales would have been down 0.1 percent.

Flat — or, at least, a slower rate of decline — has been the new up for many years for the music business, so this won’t be terribly discouraging for the industry. And the fact that the IFPI estimates there are now 28 million people paying a monthly fee for digital music subscriptions is legitimately good news.

It does look like the industry may hover around this level for a while, though. The industry still gets a majority of its revenue from the sale of CDs, so those numbers will be shrinking for a long time. And even if subscription services, which generally charge around $10 a month in markets like the U.S. for all-you-can-eat access, find more customers, other digital revenue streams are sputtering.

The growth of download sales, primarily from Apple’s iTunes, has been slowing for a while, and last year the market declined by 2.1 percent — the first time the IFPI has recorded a drop. Downloads still account for 67 percent of digital sales, though.

Meanwhile, the ringtone industry — which generated a surprising amount of money for the music business for a surprising amount of time — is on its last legs. In 2008, “mobile” sales of ringtones and other digital novelties accounted for 26 percent of music’s digital revenue. Last year that number had shrunk to five percent.

Separately, the Recording Industry Association of America, the U.S.-based music trade group, reported similar statistics for 2013: Download sales were down one percent, while subscription services grew at a blistering 57 percent.

The RIAA says revenue for all streaming services — including ad-supported offerings like Pandora and YouTube — hit $1.4 billion last year, while subscription-only on-demand services like Spotify hit $628 million. Bear in mind that those numbers don’t sync up with the IFPI numbers, primarily because the RIAA reports retail instead of wholesale revenue.

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