Revenue from paid downloads is falling faster than anyone anticipated.
According to PwC projected figures shared with Digital Music News, physical revenue is falling at a (compound annual) rate of —12.3%, falling 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 on a chart for both music formats. 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?
The music industry saw a massive move away from physical forms of music with the uprise of the digital revolution. As digital downloads increased, physical sales decreased. But now paid digital downloads are declining precipitously. 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 movement away from a reliance on illegal sites, but we also saw a massive decline in paid downloads in the following year and every year after.
Why would music consumers pay for a download when they can listen for free?
Paid download revenue fell from $2.87 billion in 2012 to $2.32 billion in 2015. PwC also predicted the revenue from paid downloads for 2016 through 2020 in the US – forecasted figures suggested that paid downloads will fall as low as $1.07 billion in 2020. The PwC figures 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 uprise of streaming is the only factor affecting these revenue streams for the US music industry. But, there are definitely reports that provide strong data which suggests that free streaming services have negatively impacted paid downloads. These PwC figures also support this notion.
Then, there’s the rumors of Apple eliminating music downloads from iTunes in as little as 2-3 years, which won’t have helped. But, it does raise the question of whether downloads will become increasingly less significant like CD’s, with streaming taking over. It certainly does look that way – streaming is already the biggest revenue generator for the US music industry, and one of the only surging methods of music consumption, alongside live music, and vinyl.
(Image by Henry Burrows, Creative Commons, Attribution-ShareAlike 2.0 Generic, CC by-sa 2.0)
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