Streaming Services Showing Profits for Record Labels

After years of clear decline in music sales, there seems to be new hope for record companies in the form of streaming services such as Pandora, Spotify and iTunes Radio. Preferred formats for recorded music have changed throughout the years from records, to CDs, and then digital downloads. However, in recent history many people, including most Americans, have ceased paying for music altogether, causing an unprecedented decline in revenue for the music industry.

Now, for the first time since the decline began in the early 2000s, there seems to be a glimmer of hope in the form of subscription streaming services. Both online radio versions, such as Pandora and iTunes Radio and services such as Spotify and Deezer pay record labels a fraction of a penny each time a song is chosen.

A close look at music labels’ worldwide revenues show that streaming services are beginning to show profits for labels in regions that had been showing steady declines. Perhaps more exciting, these streaming services are beginning to show profits in sectors that had rarely seen any before. The Economist sites a Swedish record label that has begun showing profits from its music streamed in Brazil and many indie labels that are having far more sales than would have been possible with physical media.

And record execs are not the only ones to take notice. As upgrades in cell phone service, cloud storage and other technological advancements have begun to popularize paid streaming, investments in these services of more than $1 billion have begun to pour in. Currently 4-5% of US music consumers are using paid streaming services. If this grows to only 10%, we can expect game changing profits for record companies once again.