New Music Industry Numbers From RIAA And Edison Research Show Growth Slowing

Two of the most important barometers of the strength of the music industry were published recently: today the RIAA published its Year-End Music Industry Revenue Report for 2022, and last week Edison Research published the 2023 edition of the Infinite Dial consumer research study that it has now carried out for 25 years. Both reports show that the growth that the music industry has enjoyed since the mid-2010s is slowing down.

Both of these reports reinforce what we’ve known for the past several years: recorded music industry revenue—that is, the part of the music industry that involves recordings, as opposed to songwriting and live performances—is now defined by streaming. The RIAA figures show that 84% of the industry’s $15.9 billion in total revenue now comes from streaming, up slightly from 83% in 2021. But the growth of streaming revenue has slowed down: adjusted for inflation, it grew only 7% over 2021, the first time that growth fell into single-digit percentages since the financial crisis of the late 2000s. And overall recorded music industry revenue grew 6.1% from 2021, but all of that growth was eaten up by inflation.

The numbers in the Infinite Dial survey similarly reflect a slowdown in growth. The Infinite Dial, based on a telephone survey, is done by a research firm that’s known for its rigor and consistency: Edison Research also carries out exit polling for national elections and feeds that data to most of the major television networks. The Infinite Dial has tracked listenership to the major online music services for many years. Although the latest edition of the survey shows continued increases in monthly online audio listening—now at 75% of the population, up from 73% last year—it also shows that listenership to online music services is now in slight decline, as shown in the figure below. Spotify continues to be the most popular “online audio brand,” and YouTube Music, the paid subscription service that YouTube launched in 2018, is no. 2, ahead of competitors like Apple Music and Amazon Music. (The Infinite Dial does not track the use of “regular” YouTube for music.)

The Infinite Dial survey data also shows robust growth in listenership to podcasts and audiobooks, suggesting that listeners are shifting their attentions from music to those spoken-word media types. Monthly audiobook listening is at an all-time high of 53%, up dramatically from 45% last year, while monthly podcast listening is also at an all-time high of 42%, back up after a dip down to 38% last year.

The RIAA annual revenue report shows a couple of highlights beyond streaming. One is vinyl. Vinyl continues to grow at a solid pace: revenues exceeded $1.2 billion last year, up 18% from 2021. Vinyl now pulls in more revenue than CDs and digital downloads combined, and it accounts for almost 8% of total industry revenue. Yet those numbers don’t count sales of used vinyl. The industry doesn’t track used physical sales (labels and artists don’t benefit from them), but it’s likely that marketplaces such as Discogs, eBay, and Amazon pull in hundreds of millions more; in other words, consumer spending on vinyl constitutes a double-digit percentage of overall music spending. One could even argue that vinyl is the music industry’s second prong; other evidence shows that vinyl is reverting to its former status as the premier format for albums.

This chart shows inflation-adjusted industry revenues over the past half century, as long as the RIAA has been tracking it. It shows that the current streaming-powered industry hasn’t reached the heights of the vinyl-and-tape-based industry of the 1970s, let alone the CD-driven industry of the late 1990s. (The industry’s inflation-adjusted peak revenues were $24.5 billion in 1999, compared to $15.9 billion in 2022.) If streaming growth continues to taper off, then the recorded music industry should reach somewhere near its inflation-adjusted $17.8 billion peak during the vinyl and tape era. At 75% penetration, streaming should have a few years’ growth left before it saturates the market.

The other noteworthy figure in the RIAA numbers concerns an “inside baseball” corner of the music industry that could lead to a next wave of revenue growth : synchronization. Synchronization (a/k/a synch) refers to licensing fees that producers of video, game, VR/AR, and other multimedia content pay for the use of music with their content. Video-based services such as YouTube and TikTok, and gaming platforms such as Twitch, must pay for synch licenses to music tracks that appear on them. (Whether the services themselves or their users should be responsible for these royalties is a point of contention right now.) The RIAA started tracking synch revenue for recorded music only within the last few years, but it has become significant—and it’s the fastest-growing revenue category now. It’s certainly the biggest bucket of revenue in recorded music that doesn’t come directly from consumers.

Synch licensing brought in $382 million in 2022, up 26% from 2021. At this pace, synch should overtake both CD and download revenue by next year. And it has the potential to keep growing at a healthy pace for a while. Unlike other parts of the industry, synch has very little in the way of organization or infrastructure: there are no collective licensing organizations (like ASCAP or BMI for performing rights to compositions), no standard royalty rates, and little in the way of common practice about licensing. It’s a grossly inefficient market. Rights holders—in this case, major record labels—like it that way because it gives them negotiating leverage with potential licensees, and it enables them to make blanket license deals with video/gaming/AR/VR services that are confidential. As more and more users migrate to these newer platforms and consume music there, opportunities for synch licensing will increase, as will the need for standard mechanisms for processing those royalties.

Synch licenses also contribute increasing revenue to the music publishing side of the market, the part that concerns songwriters and musical compositions; they become relevant whenever a producer of a TV show, TV commercial, movie, etc., uses a cover version of a tune instead of the original artist’s recording. The opportunities for increased revenue from synch licenses is one of the main factors that are driving prices for legacy artists’ song catalogs up into the stratosphere. Whether all this will add up to enough revenue to keep the music industry growing beyond streaming is one of the big questions for the next several years.