Record Label Financials – A New Spin

A CD Video Disc (playing side) produced in 1987.

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The recording industry, led by the four major record labels, would have us all believe that times are bad. Revenue is down, song and album sales are slipping. This spin justifies performance royalties for online services, and is a major argument for radio broadcasters to pay up as well.

An article that I read on Tunecore points out that this is not so.

Based on historical RIAA shipment data, things are not nearly so bad – as long as you look at the whole picture. The digital music market reached $3.1 billion in 2009, a 19% leap over 2008 sales figures. That number represents the songs and albums sold as downloads. Physical shipments of music dropped 21%  to $7.7 billion – mainly the loss was lower CD sales. Ringtone and mobile sales were $729 million which was a decline of 25%.

Overall shipments of recorded music (including digital downloads) were still down 12%, the RIAA points out.

What they don’t point out so succinctly is that digital performance rights are not factored into that statement, and they are soaring – up 55.5% from 2008 to 2009. After climbing 74% the previous year and 49% the year before that. Digital performance royalties added another $155.5 million for 2009, and at the current growth rate of say 50% a year, in five years that number is over a billion a year. And that doesn’t count subscription royalties which are currently at $200 million or so a year.

All of this assumes that the online streaming audience will grow. Of course that’s a safe assumption, in fact, it’s probably safe to assume that listening online is in its infancy…

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