There are so many glowing reports about the music business being stronger than ever, making more money than ever before, and thriving like no one ever thought possible. While there may be a grain of truth to those assertions, if you closely analyze the music industry revenues over the years you’ll find that we live in good times in the music business, but perhaps not as good as they once were. Visual Capitalist looked at the RIAA’s revenue reports over the last 50 years and put together a chart that tells the story.
As you can see from the image above, the CD clearly brought in the most money over the last 50 years at $367 billion, followed by vinyl and cassettes. Paid streaming, which makes up more than 89% of the industry’s revenue today, comes in at only $57 billion.
If you look at the second image above you can see how the industry has evolved with technology, and how much each new distribution format earned over the period of time it was most popular. Notice that the earnings peak was around the year 2000 at the height of the CD’s popularity. Streaming revenues have still not reached the revenue of 2010 when the industry was changing from CD to the digital formats like MP3 and ringtones (yes, that was really a thing for a little while).
Understand that all revenues are adjusted for inflation so we’re really talking apples to apples in the comparisons shown above.
It’s All In The Margins
Here’s where the grain of truth comes in. Streaming is a low overhead business. The record labels once owned their own CD and vinyl plants, which meant that they also absorbed all the costs that go into making a physical product, which was huge. That’s no longer the case with streaming, as all that’s involved is A&R and marketing costs, and many would say that those costs have been cut substantially as well.
Artist development costs for sure have fallen by the wayside. It took many of today’s music legends 3, 4 or even 5 albums before they broke through (Tom Petty, Pink Floyd, AC/DC, Madonna, Bob Marley and David Bowie off the top of my head) and the record label was willing to wait for that to happen as long as they believed in the act. Today most labels expect to see success with the first record or you’re out the door.
So the record labels of today are leaner and have higher margins, so in fact may be seeing bottom line profits that are nearly equal to the glory days, although that’s much harder to calculate. Remember that the images above are only for the U.S., and that the music business today is much more global so the music industry revenues from outside the U.S. are much higher than in the CD and vinyl days.