In the 17 years after Napster and file sharing unleashed havoc on the music industry, record labels mainly relied on paid downloads and dwindling physical sales to keep the business afloat.
But in 2016, for the first time ever, streaming services like Spotify and Apple Music became the primary moneymakers for the labels, according to newly released data from the Recording Industry Association of America.
Streaming services accounted for 51 percent of total U.S. music revenue in 2016 — about $3.9 billion — from a mix of paid subscription services (Spotify Premium, Apple Music), ad-supported services (free Spotify, YouTube), and internet radio (Pandora). That’s a 68 percent increase from 2015 streaming revenues, and PricewaterhouseCoopers estimated in 2016 that total streaming revenues for the entire industry (not just the labels) could grow to about $11 billion by 2020.
Record labels are excited about any new revenue growth, but that’s only because their business fell off a cliff in 1999 as file sharing took off and CD sales fell into a ditch. After peaking at $38 billion in 1999, it took 14 years for the music labels to see any year-to-year growth, which is about when internet music streaming began to take off.
Music artists, meanwhile, generally hate the music streaming business. That’s because unless you’re a major star like Drake or Taylor Swift, musicians don’t make a whole lot of money from streaming. And even though streaming is now officially the source of their first revenue growth in over a decade, the labels don’t love Spotify or YouTube either.
Spotify, for example, has had a lot of trouble negotiating new, favorable royalty rates with the labels as it ramps up for an expected IPO. And YouTube, which is the most popular music streaming service on the internet, gets even more label hate. Coinciding with the release of the new RIAA numbers, RIAA CEO Cary Sherman wrote in a blog post that services like YouTube abuse “legal loopholes to pay creators at rates well below the true value of music.”