Music Sales Soared Last Year, but Streaming Media Companies Staggered

The recorded music industry is in great shape, its revenue having grown 16.5% last year. However, the winners have shifted from traditional forms of distribution, an advantage for several large companies.

According to the Recording Industry Association of America:

In 2017 revenues from recorded music in the United States increased 16.5% at estimated retail value to $8.7 billion, continuing the growth from the previous year. At wholesale, revenues grew 12.6% to $5.9 billion. Similar to 2016, these increases came primarily from growth in paid music subscriptions which grew by more than 50%. This is the first time since 1999 that U.S. music revenues grew materially for two years in a row.

And by source:

Streaming music platforms accounted for almost 2/3rd of total U.S. music industry revenues in 2017, and contributed nearly all of the growth. The streaming category includes revenues from premium subscription services, streaming radio services including those revenues distributed by SoundExchange (like Pandora, SiriusXM, and other Internet radio), and ad-supported on-demand streaming services (such as YouTube, Vevo, and ad-supported Spotify).

Spotify is about to go public and raise $2 billion in the process. While Spotify is growing rapidly, it is also losing large amounts of money. Its revenue in 2015 was €1.94 billion. It lost €230 million that year. In 2017, it had revenue of €4.1 billion, but it lost €1.24 billion.

Wall Street does not like Pandora Media Inc.’s (NYSE: P) business model or its financials. Its shares trade at $5.11, down 54% in the past year, against a rise in the S&P 500 of 23%. Pandora’s revenue last year fell to $1.38 billion from $1.46 billion in 2016. The company had a net loss of $518 million, against a loss of $343 million the year before.

Investors think the streaming media industry is too crowded, even if it is growing. While it remains so fragmented, the perception will not change, even if the model is the leading edge of the industry.

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