Streaming guides U.S. music industry to its best year since 1998

The U.S. music industry has been crying poor for some time, arguing that YouTube and other ad-supported streaming services don’t pay enough money in licensing fees for the music they use. But that message may be harder to sell now.

In 2016, the record industry had its best year in nearly two decades, the Record Industry Association of America said on Thursday. Total U.S. retail sales from recorded music rose 11.4% last year, to $7.7 billion, the biggest gain since 1998.

The bulk of that growth came from streaming services, which have overtaken sales of compact discs and other physical products. For the first time, streaming provided more than 50% of the industry’s annual revenues, the RIAA said.

The industry isn’t giving up its claim that YouTube is underpaying for the music played on the service, however. In the preamble to its report on Thursday, the RIAA noted that while 2016 was a “substantial overall improvement for the industry,” total revenues are still half what they were in 1999, and that sales of physical products like CDs and digital downloads continue to decline.

In an essay about the industry’s results, RIAA president Cary Sherman said that the business had achieved its “modest success” in spite of current music licensing and copyright laws, not because of them.

“It makes no sense that it takes a thousand on-demand streams of a song for creators to earn $1 on YouTube, while services like Apple and Spotify pay creators $7 or more for those same streams,” Sherman said. “Why does this happen? Because a platform like YouTube wrongly exploits legal loopholes to pay creators at rates well below the true value of music.”

The RIAA continues to argue that the Digital Millennium Copyright Act is misguided, and that YouTube benefits from the “safe harbor” provisions in the act, which allow it to host even copyright-infringing music provided it takes action when notified of any infringement.

Total revenues paid to the RIAA by streaming platforms such as Spotify, Apple Music, Tidal, and others amounted to $3.9 billion, an increase of almost 70% from a year earlier. In just five years, streaming has gone from 9% of recorded music revenues to 51% of the total.

Revenues from paid subscriptions showed the most growth, more than doubling to $2.5 billion, the RIAA said, accounting for about a third of all the growth in recorded music revenue.

The industry group said that RIAA revenue from on-demand subscription services supported by advertising, which would include services like Pandora and YouTube, rose 26% and contributed $469 million of the total last year. Sales of digital downloads, however, declined by 22% compared to 2015.