Gains in online music streaming revenues will far outpace those for music downloads this year, according to a new Strategy Analytics report. The Boston-based market research firm forecasts online streaming revenues will grow at nearly five times the rate of download revenues this year.
2012 streaming music revenues should increase 40% in 2012 to $1.1 billion. Download revenues will increase 8.5% to $3.9 billion, according to Strategy Analytics’ latest Global Recorded Music Forecast. Given their comparative growth rate trends, revenues from online streaming services will exceed those for downloads and become the “growth engine for the music industry in 2012,” according to Strategy Analytics, “generating an extra $311 million– $8 million more than downloads at $303 million.”
Projecting overall digital music spending, including mobile, spending will rise 17.8%, or $1.3 billion, in 2012 to $8.6 billion compared to a 12.1%, $1.9 billion decline in packaged music sales, Strategy Analytics forecasts.
As a result, digital music as a share of global recorded music spending will increase to 39% of the industry total this year, which nonetheless means that packaged music sales will still account for the lion’s share– 61%– of overall spending.
Strategy Analytics forecasts that the situation will be reversed in 2015, when global digital music sales will exceed those for packaged music sales. Digital music sales will overtake packaged music sales much sooner in some countries, according to the firm’s analysis, however. The “U.S., Sweden and South Korea are making the transition to digital taking the lion’s share of spending at a much faster rate,” the firm’s analysts point out.
“Although downloads still account for nearly 80 percent of online music revenues, this market is maturing and spending is flattening in all key territories,” Director of Digital Media Ed Barton commented. “Streaming music services such as Spotify and Pandora will be the key growth drivers over the next five years as usage and spending grow rapidly.”
Music buyers “are increasingly valuing accessibility and availability over actual ownership of digital music, which, in turn, drives growth in streaming services which routinely offer instant access to over 10m tracks,” the market research firm notes. “Additionally, the emergence of cloud storage of a subscriber’s existing music library for seamless streaming to a range of connectable devices improves the value proposition further.”
Breaking out its forecast along geographic lines, Strategy Analytics says that 2012 U.S. streaming revenues will grow at four times the rate of downloads– 27.8% vs. 6.7%. Compared to the global average, U.S.online streaming and downloads taken together account for double the share of music spending– 41% vs. 22%.
On the other hand, U.S. physical sales are falling this year, though at less than the global average. Spending is expected to decline 9% in 2012 in the U.S., with digital spending on music overtaking physical spending this year. Globally that is not expected to happen until 2015.
“Having stabilized long-term revenue declines resulting from the downsizing of packaged music spending, the industry will be hoping that digital can rebuild the US music market to something approaching its former stature,” Barton concluded.