Digital downloads had a short run as the top-selling format in the music industry. It took until 2011, a decade after the original iPod came out, for their sales surpass those of CDs and vinyl records, and they were overtaken by music streaming services just a few years later.
The RIAA released its 2017 year-end revenue report on Thursday, showing that revenue from digital downloads plummeted 25 percent to $1.3 billion over the previous year. Revenue from physical products, by contrast, fell 4 percent to $1.5 billion.
Overall, the music industry grew for the second straight year. And with $8.7 billion in total revenue, it’s the healthiest it has been since 2008, according to the report.
Nearly all the growth was the result of the continued surge in paid music subscription services such as Spotify and Apple Music. Those services grew by more than 50 percent to $5.7 billion last year and accounted for nearly two-thirds of the industry’s revenue. Physical media accounted for 17 percent, while digital downloads made up 15 percent.
RIAA Chairman Cary Sherman called the industry’s recovery “fragile” in a Medium post Thursday.
“We‘re delighted by the progress so far, but to put the numbers in context, these two years of growth only return the business to 60 [percent] of its peak size — about where it stood 10 years ago — and that’s ignoring inflation,” Sherman wrote. “And make no mistake, there’s still much work to be done to make this growth sustainable in the long term.”
The outlook for digital downloads is bleak. This is the third year in a row they’ve posted double-digit declines, according to the RIAA. And this is the first time since 2011 they’ve fallen behind physical music media. If the trend continues, they could wind up going the way of the eight-track tape, which was overtaken in the early 1980s by the cheaper and more compact cassette.
The situation isn’t very rosy for physical media, either. CD shipments continued their years-long decline, falling 6 percent to $1.1 billion in 2017, according to the report.
But vinyl sales were up 10 percent to $395 million — a “bright spot among physical formats,” the RIAA noted. It’s a tiny fraction of the industry’s overall sales, but it was enough to persuade Sony last year to start pressing LPs again after a 28-year hiatus.