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June 14, 2013 | Music Notes Blog

Music Industry Continues To Lead the Way in Digital Adoption, With A Bit of Vinyl On The Side

The announcement earlier this week of a new music streaming service by Apple has yet again drawn attention to the rapidly emerging digital music space. Based on the announced description, iTunes Radio sounds like a great new entrant. And it joins a long list of services that give fans almost any type of listening experience they are looking for, and often for free.

The announcement also brings attention to two interesting, and seemingly contradictory trends in music listening that are occurring simultaneously.

First, the release last week of the PWC Global Entertainment and Media Outlook highlights the importance of digital distribution to a number of industries. In the US, music, movies, books, newspapers, and magazines all saw growth in the proportion of revenues they derive from digitally distributed sources. But among those “traditional” media industries, the music industry is far ahead in its adaptation to the online world. Based on RIAA shipment and revenue data, digital grew from 51% to 59% of total industry revenues in the US from 2011 to 2012. Both the overall proportion and the amount of growth were much higher than for any of these other media (chart below).

On the other hand, a recent NY Times article highlighted the continued growth of vinyl records, a format once considered dead with the advent of digital technology. According to the article, Nielsen SoundScan estimates vinyl sales to grow to 5.5 million in 2013, the highest level since the early 1990’s. Our own RIAA numbers, (which date all the way back to 1973 and are collected directly from the music companies) tell a similar story. Vinyl LPs grew 29% from 2011 to 2012. Though vinyl still remains only about 2% of the overall market (by value), it clearly holds an interest for fans.

So why is it that a format less convenient to use (can’t be organized as a playlist, much harder to take with you to the gym) is gaining in popularity? It could be that audiophiles still love to listen to vinyl for the classic sound quality, or that they prefer the more tactile experience of a physical product. But maybe the dramatically increased availability of digital music through so many new distribution models is actually enabling the purchase of such a nostalgic product. Where vinyl owners previously would have to go to the effort of ripping music from the record, or finding digital copies if they wanted to include the music on their digital devices, now they can have the best of both worlds. They can buy the record, but then listen online very easily. And many records now come with codes for digital copies of the music as well. So even with just the analog purchase, more and more the listener can also have the digital experience.

Recent user data suggests this may help explain what is happening. According to research from The NPD Group people who purchased vinyl records in 2012 were three times more likely than the average respondent to use paid on-demand or paid Internet radio services. They were also significantly more likely to use free online music services. Everyone’s music listening habits are different, but we think it’s certainly possible that this is an example where the development of the newest, latest and greatest is letting fans connect with their favorite music and artists in ways surprising to us all.

Joshua P. Friedlander
Vice President, Strategic Data Analysis, RIAA