Are digital subscriptions saving the music industry?

The International Federation of the Phonographic Industry (IFPI) just published its annual Digital Music report. In 2012 the industry saw its first year of growth (+0.3%) since 1999. There are a couple of other interesting data points:

  • Digital revenues increased by an estimated 9 per cent to US$5.6 billion in 2012, now accounting for around 34 per cent of global industry revenues.
  • Download sales increased in volume by 12 per cent globally in 2012 and represent around 70 per cent of overall digital music revenues.
  • The number of people paying to use subscription services leapt 44 per cent in 2012 to 20 million. Subscription revenues are expected to account for more than 10 per cent of digital revenues for the first time in 2012.
  • Digital channels account for the majority of record companies’ income in an increasing number of markets including India, Norway, Sweden and the US.

The report also keeps calling out piracy as the main barrier to growth, yet there hasn’t been a significant milestone in this area that could explain the growth in the industry in 2012. What has been driving the growth is companies getting closer to a value proposition for users that is better and more convenient than piracy at an acceptable cost: digital subscriptions with unlimited streaming and a gigantic music catalog. In Sweden, home of Spotify and the Pirate Bay, almost 50% of internet users used a subscription service in 2012. Subscriptions are disrupting piracy.

What this industry needs is more carrots, less sticks.

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