Streaming is Now the Most Popular Form of Music Consumption in the U.S.

The Recording Industry Association of America reported this week that revenues from streaming music services surpassed those of both digital downloads and physical media for the first time in 2015, ushering in a new age for the music industry.

“The music industry is now a digital business, deriving more than 70 percent of its revenues from a wide array of digital platforms and formats,” RIAA CEO Cary Sherman writes in a blog post. “The share of revenues from those digital formats surpasses that of any other creative industry.”

The bigger headline? For the first time, digital music subscription services surpassed $1 billion in revenues in 2015, accounting for 34.3 percent of all revenues. Digital downloads—mostly iTunes—were second, with 34 percent of revenues. And physical media, mostly audio CDs, came in third with 28.8 percent of revenues.

Driving the growth in digital music subscription services, the RIAA says that there were about 13 million paying subscribers by the end of 2015 (in the U.S.), and the expectation is that the number of paid subscribers will keep growing.

Hinting at some of the high profile news stories from 2015—big services like Spotify and Pandora were both involved in licensing disputes in which both were forced to pay bigger royalties than before—Sherman said that challenges remain.

“In 2015, fans listened to hundreds of billions of audio and video music streams through on-demand ad-supported digital services like YouTube, but revenues from such services have been meager — far less than other kinds of music services,” he wrote. “And the problem is getting worse.”

Well, yes. But surely the RIAA understands that the ease of digital delivery means lower per-unit royalties but also larger audiences for the music … and larger overall revenues. Since this is, as he notes, “at its core, about artists and their art.”

Looking at the RIAA’s report, I see that streaming has exploded since 2010: Back then, just 7 percent of total U.S. music revenues were from music streaming Today, that figure is 34 percent. But revenues are indeed up, if slightly.

Looking at these trends with a Microsoft focus, it’s not hard to understand why Microsoft dropped the digital download-focused Zune service for the more modern Xbox Music/Groove service, which is primarily streaming- and subscription-based. But it’s still unclear why Microsoft let MixRadio go in the wake of its Nokia buyout: MixRadio provided that Internet radio station/music discovery piece that is still sorely missing from Groove. And services like Spotify, Google Play Music, and Apple Music are vastly superior as a result.