The music industry in the United States is in full swing, and the numbers speak volumes. The Recording Industry Association of America (RIAA) recently released its Mid-Year 2023 Report, shedding light on the state of the industry. Let’s dive into the key takeaways from this report.
Record-Breaking Revenues
In the first six months of 2023, the US recorded music industry raked in a whopping $8.4 billion in gross revenues. This headline figure is bound to turn heads and rightfully so. It represents a 9.3% year-over-year (YoY) growth in recorded music revenues when considering streaming subscriptions, physical sales, and digital music.
Delving deeper into these revenues, when you look at what actually goes back to record labels, distributors, and artists, the wholesale basis, the industry generated $5.3 billion in H1 2023, marking an 8.3% YoY increase.
The surge in revenue growth demonstrates the resilience and adaptability of the music industry in the digital age. Even as consumption patterns change, the industry continues to thrive.
Streaming Dominates
Unsurprisingly, streaming is the powerhouse behind this revenue surge. Streaming services encompassing paid subscriptions, ad-supported platforms, digital radio, social media, and fitness apps played a pivotal role in boosting revenue. In H1 2023, streaming revenues grew by 10.3% YoY, reaching an impressive $7 billion, accounting for a staggering 84% of total recorded music revenues in the US.
Breaking it down further, paid subscription services, which encompass both full-premium and ‘limited-tier’ subscriptions, were a major driving force. Revenues from paid subscriptions jumped by 11% YoY to $5.5 billion in H1 2023, constituting nearly two-thirds of the industry’s total revenues and over three-quarters of streaming revenues.
Ad-Supported Streaming Lags
While paid subscriptions soared, ad-supported music streaming services grew at a slower pace. Revenues from on-demand ad-supported services, including YouTube and the ad-supported version of Spotify, inched up by just 0.6% YoY to $870 million in H1 2023.
The Subscription Slowdown
A noteworthy trend that this report highlights is the deceleration in the growth of paid subscription numbers in the US. While the number of subscriptions still increased, the pace was slower than in previous years. In H1 2023, the average number of subscriptions stood at 95.8 million, an increase of 5.8 million YoY. To put it in perspective, in H1 2022, the number was 90 million.
This slowdown in subscription growth could signal that the market is inching closer to a saturation point. However, the report also notes that existing subscribers are paying more. This suggests that recurrent price increases, advocated by many in the industry, will become crucial in the coming years if this trend persists.
Physical Formats Hold Steady
Amidst the digital boom, physical music formats like vinyl LPs and CDs haven’t lost their charm. Revenues from physical formats reached $882 million in H1 2023, marking a 5% YoY increase. Vinyl records, in particular, saw a 1% YoY growth, reaching $632.4 million, accounting for 72% of physical format revenues.
Interestingly, even though vinyl revenues increased, there were fewer units sold in H1 2023 compared to H1 2022. This suggests that vinyl prices are on the rise, reflecting the format’s resurgence as a collector’s item.
A Thriving Music Ecosystem
In conclusion, the RIAA’s Mid-Year 2023 Report paints a picture of a thriving music industry that continues to reach new heights and shape our culture. It highlights the dynamic nature of the industry, where streaming dominates but physical formats still have their place. As the industry grapples with changing consumer behaviors, innovation, adaptability, and pricing strategies will play key roles in sustaining this growth.