The Recording Industry Association of America (RIAA) released figures showing the music business did very well in the U.S. in 2018.
And, for the first time in a long time, physical music sales — CDs and vinyl records — combined to outsell downloads from sources like Apple’s iTunes Store.
RIAA 2018 Report on Music Revenue
The RIAA announced the release of its 2018 report on revenue, outlining how well the U.S. music industry is doing, and where its revenue is coming from. And from the perspective of music labels, things are looking pretty rosy.
According to the RIAA, revenue from recorded music in the U.S. was up 11.9% in 2018, hitting $9.8 billion. Of that, $7.4 billion — or 75% of revenue — came from streaming music services, led by Spotify and Apple Music.
Drilling down deeper, the RIAA says that paid subscriptions rose 32% in 2018, to hit $5.4 billion, with the remaining $2 billion in streaming revenue coming from free, ad-supported sources.
Continued growth in paid subscription services isn’t just good news for the RIAA, it’s also a win for Apple. As the company scrambles to grow its Services revenue to make up for softening iPhone demand, Apple Music is a big part of the strategy.
On the Flip Side (for Apple), iTunes Revenue Is Dropping
The positive news about streaming music revenue does have a downside for Apple. For the first time in many years, physical music sales — CDs and records — outsold digital downloads. Apple’s iTunes Store is still the primary way to buy digital music, but in 2018 the entire category dropped to just over $1 billion. Digital downloads accounted for 11% of U.S. music revenue in 2018, while physical music sales hit 12%.
That’s a long way off from February 2013, when AAPL announced the iTunes Store had sold its 25 billionth song. At the time, the iTunes Store was riding high, and digital downloads had made Apple the world’s largest music retailer. By 2014, Apple was reporting double-digit declines in iTunes Store music sales, blaming the growing competition from $10 music streaming plans and free ad-supported services.
To put things in context, the RIAA reported 2013 U.S. music revenue flat at $7 billion, for the fourth consecutive year. By 2015, Apple was in the music streaming business itself…
In a sign of just how popular vinyl is becoming, the RIAA says record sales are on track to eclipse CD sales. In 2018, vinyl sales were up once again, hitting $419 million. CD sales beat that at $698 million, but they dropped 34% compared to 2017. With vinyl on a near decade-long growth path and CDs declining in popularity, it’s only a matter of time before records are once again the most popular way to actually buy music (and if you’re in the vinyl camp, check out our guide to 10 great turntables).
What Does This Mean for Apple?
Overall, the music picture is bright for Apple.
Yes, it’s steadily losing revenue from iTunes digital downloads of music — in fact, rumors have been circulating for the past year that the company may shut the service down altogether. RIAA numbers, however, show people are spending more on music. And AAPL is getting a big cut of that with Apple Music.
As of January, Apple Music had racked up 50 million subscribers, globally, a number that helped push its Service revenue to record highs.
If gaining subscribers who pay $9.99 every month comes at the cost of occasional digital downloads, AAPL seems happy to make that trade. And judging from the RIAA’s numbers, the American music industry in general is doing better as a result.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.