The RIAA's release of 2023 revenue figures shows that US record labels are increasingly – perhaps too much – dependent on paid subscriptions for both revenue and revenue growth. While consumers continue to pay for premium streaming services, ad-supported on-demand streaming is languishing, and newer platforms like TikTok provide more promotion than rights.
The top benchmark of the RIAA's 2023 report is that the US market grew 7.7% to $17.12 billion, an improvement from the 6.6% rise seen in 2022. Not adjusted for inflation, the 2023 revenue was about 17% above the CD-era peak of $14.6 billion in 1999, marking the ninth consecutive year of revenue growth after the U.S. market bottomed out at $6.95 billion in 2014. After nearly a decade of profits, the record business is healthy and steady.
But look at the RIAA's report and you'll see that the US market is not as dynamic as it could – and wants – to be. The revenue mix does not have the diversity of past years. It's not for lack of trying: labels are partnering with AI startups, licensing music to social media platforms, and looking for new ways to engage with big-spending fans. But emerging categories remain just that — emerging — while other categories aren't yet providing much of a revenue boost. On-demand streaming has turned the industry around, made music an attractive asset class for investors and allowed few companies to go public. But where does it go from here?
Here are five excerpts from the report.
The US market is more dependent than ever on paid subscriptions.
Paid subscription revenue from premium music streaming services like Spotify and Apple Music totaled $10.15 billion and accounted for 59.3% of total recorded music revenue in 2023, up from 57.8% in 2022 ( and much higher than the rates seen in previous years: 57.2% in 2021, 57.4% in 2020, 53.4% in 2019 and 47.3% in 2018). But US labels relied even more heavily on subscriptions for revenue developmentwith paid subscriptions accounting for 79.4% of that growth in 2023. Ad-supported streaming — services like TikTok and Facebook — grew 21.5%, or $56.2 million, but accounted for only 4.6% of annual growth.
New subscribers are harder to find.
Despite the growth attributed to subscription services over the last decade, it may not be enough for some markets. As Advertising sign Noted on March 15, SNEP, the French recorded music trade group, warned that subscription revenue growth is “slowing down here, while our market is far from mature.” Fortunately for the United States, subscription penetration has surpassed 50% of US internet users, according to MusicWatch. However, the RIAA's figures for 2023 suggest that streaming services have already picked the low-hanging fruit and new products will be needed to attract new customers. With far fewer new subscribers in 2023 than in previous years, labels were lucky that Spotify raised the price for its standard solo plan in 2023. After adding 7.6 million subscribers in 2022 and 8.5 million in 2021 , the US market added just 5.2 million in 2023. That's a sharp drop from the 15.1 million new subscribers gained in 2020, when pandemic restrictions fueled a surge in music and video-on-demand streaming services. Price increases from Spotify in July and Amazon Music in both January 2023 and August helped average monthly revenue per user improve to $8.74, up from $8.35 in 2022.
The ad has tripped.
A few years into the rise of ad revenue, the power of ad-supported streaming is probably its ability to convert some free users into paying customers. Ad-supported on-demand streaming revenue grew just 2.3% in 2023, an even worse showing than the 3.5% improvement in 2022. Things looked much better a few years ago, as ad-supported streaming revenue ad-supported demand grew 46.7% in 2021 after slowing in 2020 due to the COVID-19 pandemic. Ad-supported on-demand streaming actually fared better in the pandemic-hit 2020, rising 32.2% even as the bottom fell out of the ad market as brands braced for a recession by cutting back on ad spending. It was a remarkable turn of fortune for the promise of ad-supported music. after Spotify's ad-supported revenue grew 81% in 2021, CEO Daniel Ek said the growing online ad market bodes well for India, Indonesia and other growing markets where Spotify operates. Since then, however, subscriptions — especially in mature markets like the United States — have carried the load for Spotify and others.
Social media is growing fast but still small.
The highest growth rate of any category in 2023 came from “other ad-supported streaming,” which includes relative newcomers to licensing deals like TikTok. Other ad-supported streams jumped 21.5% to $317.7 million, making the category about 75% as valuable as the rapidly declining downloads and ringtones category (which fell 12.2% last year). The downside is that the category remains a small part of tag activity:. Last year, other ad-supported streams accounted for less than 5% of total revenue growth — about 6% as much as subscription services.
Physical sales were reliable, not explosive.
Both LPs and CDs saw double-digit growth in 2023 — 10.3% for LPs and 11.3% for CDs — as physical formats benefited from enthusiasm for vinyl collectibles and a fan trend of K- pop to buy multiple CD variants of new releases. Total physical revenue increased $181 million, or 10.5%, to $1.91 billion and is up 66% from 2018. This offset a $60 million decline in legacy digital formats such as track downloads and albums and ringtones. However, vinyl and CD sales accounted for 14.8% of 2023 revenue gains compared to 79.4% of subscriptions.
