BERLIN, GERMANY - JANUARY 21: The Logo of streeming services Amazon Music and Spotify is displayed on the screen of a smartphone on January 21, 2016 in Berlin, Germany.  (Photo by Thomas Trutschel/Photothek via Getty Images)

Digital Sales Officially Just Outsold Physical Ones – So What Does It Mean?

For the first time in 20 odd years, music industry revenue has gone up, and it’s pretty much all because of digital sales, driven by subscription services like Spotify.

In their annual Global Music ReportSwitzerland-based International Federation of the Phonographic Industry (IFPI), report that global music sales rose by 3.2% last year as digital music revenue surpassed those from all physical music formats for the first time. The rise is reportedly largely in thanks to the massive 45 percent of recorded music profit coming from online, digital services.

After two decades of almost uninterrupted decline, 2015 witnessed key milestones for recorded music: measurable revenue growth globally; consumption of music exploding everywhere; and digital revenues overtaking income from physical formats for the first time. They reflect an industry that has adapted to the digital age and emerged stronger and smarter.

Total recorded music revenue grew 3.2 percent to $15.0 billion in 2015. While physical sales have been in steady decline for many years the digital realm, as we all know, has taken it’s sweet time catching up. In fact, it is somehow altogether surprising that this hadn’t happened sooner. Now with subscription services totally changing the way most people listen to music, the IFPI found that a mere 68 million paying subscribers to streaming services (which is up from 41 million in 2014) equated to roughly $2 billion in revenues in 2015.

Still, it isn’t all good. Among other more negative notes, the IFPI joined a growing list of trade bodies and music industry professionals to criticise YouTube for paying royalties that are relatively low considering the popularity of the platform as a music listening service. The IFPI argues that YouTube uses an “act first, negotiate later” method, which “fundamentally distort[s] the negotiation process.” The report found that while music is being consumed at record levels, market distortion has resulted in a “value gap”, which is depriving artists and labels of a fair return for their work.

Writing in the statement accompanying the report, IFPI CEO Frances Moore says that at the moment, there is still not enough being done to support musicians as they come to rely more and more on digital sales. “Exploding music consumption is not enough… Value returned to the music community is vital too if we are to fund future innovation and creativity.” Moore went on to say that the change is needed and called on policy makers in the music sector to be the ones to instigate that change.

Image: Fortune