THE TIDE TURNS

Paid music services hit a critical mass in 2015

Shortly after Apple Music launched in the US last June, its streaming music rival Spotify said that Apple’s entry into the space would “validate streaming as the future of the music industry.” That assessment appears to be right.

Streaming is now the largest revenue-driver in the US music industry, the Recording Industry Association of America found. Its revenue dethroned physical sales and edged ahead of digital downloads for the first time in 2015, thanks to new paid-subscription services like Apple Music that boosted the broader demand for streaming music.

The music industry made about $7 billion last year, and 34% of that, or $2.4 billion, came from streaming music, according to the trade group, which put out its annual report on music shipments and revenues on Tuesday (Mar. 22).

Most of that streaming revenue came from paid subscription services such as Spotify, Apple Music, and Tidal. Paid platforms like these brought in a total of $1.2 billion in revenues in 2015—52% more than the previous year.

Apple Music, which launched in June, helped spur a lot of that growth during the second half of 2015. During the first half of the year—before Apple’s streaming platform was available—the average number of paid music subscribers was only up about 3%, but by the close of 2015 it jumped a staggering 40% year-over-year to 10.8 million.

To be sure, Apple can’t be credited for all of that growth—Spotify and Tidal also made big plays for subscribers during the second half of the year.

Many folks were also lured by one- and three-month free trials that they may cancel when they actually have to pony up $9.99 a month for Apple Music and Spotify or $19.99 for Tidal. It remains to be seen whether the category can sustain this unmatched level of growth in 2016.

Overall, Apple Music reportedly has 11 million subscribers. Spotify has 30 million. And Tidal, which has been floundering since it launched last March, is estimated to have about 1.5 million.

Meanwhile, free ad-supported streaming services such as YouTube and Spotify’s free-tier made a measly $385 million in 2015. That’s less than the industry made from selling vinyl records during the year.

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