CDs and vinyls are outselling digital downloads for the first time since 2011 thanks to streaming services, industry figures reveal.
Apps like Spotify and Apple Music have seen an astronomical rise in popularity in recent years and this has all but destroyed the digital download market.
As more people choose to stream music rather than own it, sales of physical media are now falling at a slower rate than their digital counterparts.
This has been driven, in part, by a resurgence in vinyl sales among audiophiles, who prize the format’s unique sound.
CD’s and vinyl copies of music are outselling their digital counterparts for the first time since 2011. The downward trend for digital copies means the revenue has fallen behind that of physical media sales
Findings from the 2017 report by The Recording Industry Association of America (RIAA) show that digital downloads revenue fell to $1.3 billion (£920 million) last year.
Physical media, such as CDs and vinyls, also fell in total value, but only declined to $1.5 billion (£1.06 billion).
For the first time since 2011, when digital downloads took off, physical media sales top that of downloads via online stores like iTunes and Amazon.
The combined worth of both physical media and downloads pales alongside the money produced by streaming, however.
Streaming continues to grow and dominated the music revenue stream. The total industry is now worth the highest figure since 2008. Streaming accounts for $5.7 billion (£4 billion) of the business making up 65 per cent
Platforms such as Spotify, Apple Music, Amazon Music and Tidal account for the majority of all income.
In the US, the music industry is now worth an approximate $8.7 billion (£6.1 billion) and, of this vast wealth, 65 per cent of it comes from streaming.
Streaming now brings in around $5.7 billion (£4 billion) to the US industry every year, and a vast chunk of this comes from paid subscriptions.
These premium memberships, to sites such as Spotify, saw an increase of more than 50 per cent in 2017.
Ad-based subscriptions for those reluctant to pay for a premium service also increased by 35 per cent.
The US music industry has struggled recently. Despite this, 2017 marks the first time since 1999 that the industry has grown for two consecutive years and is now worth an approximate $8.7 billion (£6.1 billion)
In 2016, the music industry made more than half of its revenue from streaming.
Although this was the first time streaming had accounted for more than 50 per cent of total revenue, the growth continued into 2017.
Last year, nearly two-thirds of all revenue — over $5.7 billion (£4 billion) — came from streaming, an increase of 43 per cent.
Thanks to the spread of dedicated software, the relatively small amount of income from physical media and digital sales is more than offset by streaming, leading to steady growth.
Streaming has continued to grow and bring in more money. In 2016, the music industry made more than half of its revenue from streaming. Although this was the first time streaming had accounted for more than 50 per cent of total revenue, the growth continued into 2017
This overall growth means that the industry is now the most successful it has been since 2008.
As well as making more money than it had at any point in the last decade, the 16.5 per cent growth from 2016 marks the first ever time since 1999 that the business has expanded for two years in a row.
Figures released in January revealed that more than four million vinyls were sold last year in the UK, purchased at a quicker rate than in 1991 and the US has seen a similar revival of fortunes for the retro format.
Some experts believe that these trends will continue, and that the digital download will soon become obsolete.
Physical sales of CDs and vinyl have struggled, and saw a decrease in popularity. The decrease of digital downloads, however, was more severe and dropped behind the physical sales for the first time since 2011
ARE PRICES FOR SPOTIFY, APPLE MUSIC AND PRIME MUSIC GOING TO RISE?
Music streaming services, like Apple Music and Spotify, could be set to raise subscription prices, following the decision to increase royalties for songwriters and music publishers.
Earlier this year, a federal copyright board raised the music streaming royalties for songwriters and music publishers by more than 40 per cent to narrow the financial divide separating them from recording labels.
The decision stemmed from a long-running dispute that pitted songwriters against steadily growing music streaming services sold by Spotify, Apple, Google, Amazon and Pandora.
The Copyright Royalty Board’s decision will require those services to pay 15.1 per cent of their revenue to the songwriters and publishers, up from 10.5 per cent.
The music publishers association hailed the ruling, stating that it represents ‘the most favourable balance in the history of the industry’.
None of the major companies affected by the new music streaming royalties have confirmed whether the shift will prod any of them to raise the prices paid by consumers.
The popularity of music streaming services has soared in the past few years as more consumers have embraced paying a monthly or annual subscription fee for unlimited access to tens of millions of songs instead of incrementally buying a more limited amount of music on CDs or in a digital download.
Those changing habits have pushed artists, songwriters and publishers to step up their efforts to get a larger cut of the royalties generated from music streaming – a format that didn’t even exist when some performers signed their last record deals years ago.
The Copyright Royalty Board drew up the new rates for songwriters and publishers after hearing evidence during a trial held in 2017.
A leaked email from earlier this month hinted at some major changes to Apples iTunes in light of weakening figures.
With falling fortunes, Mark Mulligan, an analyst at MIDiA Research and music industry blogger, told the Metro that this was ‘potential evidence’ of Apple’s future plans.
He said: ‘This could show Apple will turn off its download store at some point.
‘At some stage in the future, Apple having an iTunes music store will be as incongruous as Currys selling black and white TVs.’
The future seems to lie in streaming, and a sub-section of streaming has emerged as a popular favourite.
Dubbed ‘Limited tier paid subscriptions’, they are basically subscription streaming services with some sort of major constraint.
Amazon, for instance, sells an unlimited music subscription that only works on a single Echo for far cheaper than a full subscription.
This sector accounted for 14 per cent of the subscription market in 2017 and is rapidly growing.
The recent popularity of smart speakers with integrated AI capabilities, such as the Amazon Echo, Google Home and the Apple HomePod, has likely fuelled the growth of streaming.
With digital assistants that respond to voice commands, such as Amazon’s Alexa and Apple’s Siri, the companies are seeing more traffic from users using these platforms.
In a statement to The Verge, Amazon Music vice president Steve Boom said that the total hours of music streamed using Alexa-enabled devices has already doubled this year.
He said: ‘In the US, we’ve seen more than half of Amazon Music listeners used voice year to date, and compared to this period last year, we’ve already seen that the total hours streamed on Amazon Music via Alexa-enabled devices have doubled in the US.’
Digital downloads (yellow) have become less popular in recent years. As well as bringing in less money, they continuously account for a lower percentage of total music sales