Party like it's 1999

I wrote about the music industry's impressive recovery in the February 2022 AWSI. Robust LP sales were a headline item of that report, but they're a sideshow: Paid-subscription streaming is what is bringing the industry back.

When I wrote that, 2021 wasn't quite over, so year-end financials weren't available. They're available now.

According to the Recording Industry Association of America, in 2021 recorded-music revenue reached $15 billion, an astonishing $2.9 billion—19.3%—increase over 2020. That increase is probably exaggerated by COVID-suppressed 2020 revenue—physical media sales were certainly down—but 2020 revenue was still $1 billion higher than 2019's.

Numerically, 2021 recorded-music revenue set a new record: $400 million higher than the previous record high, in 1999—the year before the start of the great decline, when illegal file sharing nearly broke the industry. Those numbers, though, are not corrected for inflation. The inflation-corrected revenue figure for 1999 is $23.7 billion—so, in real terms, the industry's recovery is very much unfinished. In real dollars, revenue in 2021 was less than two-thirds what it was at the industry's peak.

Still, the growth rate is impressive. Last year's revenue increase was the largest on, um, record, and since the recovery began, in 2016, the average revenue rise was $1.4 billion/year. The rate of increase is still increasing, and even at the current rate, the recovery will be complete by 2024.

Yet, for our industry and hobby, serious questions remain. The most obvious is, how long can this go on? While there's no sign yet that the revenue curve is flattening, we know that at some point the market will saturate. Everyone who wants a paid music-streaming subscription will have one. Once all the potential customers have bought in, the only way to increase total revenues is to raise prices.

I'm willing to pay more. Current prices seem low relative to the value of the service provided. That, surely, is partly because I value the service more than some others do. It's also, probably, because the music-streaming industry is in growth mode, not profit mode: They're spending a lot to locate new subscribers. Streaming-company profitability, though, is essential for this new music-distribution ecosystem to survive and thrive. So, how's that effort going?

Spotify, currently, is of little interest to audiophiles. Their highest-tier service is lossy and sounds noticeably worse than its lossless competitors. More than a year ago, Spotify announced that it would be introducing a lossless tier, but it hasn't happened yet. Spotify doesn't seem to know that audiophiles exist, or if it does, it doesn't care.

There's only one reason to focus on Spotify: It's a streaming-only company that's publicly held, which means it routinely reports financials. Consider it a proxy for the music-streaming industry.

Spotify—which has stated publicly that it's not yet pursuing profits—is nonetheless already intermittently profitable. The company's Q4 financials reported revenue up by $188 million to $2.69 billion, quarter over quarter. Paid subscribers rose 16%, to 188 million. Spotify, though, was slightly in the red, reporting a net loss of $7 million. Contrast that with the previous quarter, when Spotify reported a $75 million net profit.

The loss is of no concern: Spotify can turn a profit whenever it decides to simply by spending less to build their subscriber base. Spotify's future looks bright.

Of greater importance are the audiophile-friendly streaming services, the ones that offer streams of at least CD resolution—preferably hi-rez—that are willing to work with hi-fi manufacturers to make their streams accessible on hi-fi components. To my mind, the best examples are Qobuz and Tidal because they work seamlessly with Roon, which allows local libraries and the streaming services to be searched simultaneously. That's a huge advantage.

Until recently, both Tidal and Qobuz were privately held, but in March 2021, Tidal was acquired by Square, the electronic-payments company, for $293 million. (In December 2021, Square changed its name, to Block.) Square—now Block—is publicly held, so it files quarterly financial reports. According to its Q3 2021 shareholder report, Square's "Corporate and Other" category "generated $58 million in revenue" and "$15 million in gross profit." That revenue and profit "was primarily TIDAL during the quarter," the report states. In Q4, Block (same company) reported that the "Corporate and Other" category "generated $56 million in revenue during the fourth quarter and $7 million in gross profit. For the full year, Corporate and Other generated $152 million in revenue and $32 million in gross profit." Again, that revenue and profit was "primarily TIDAL in the quarter and full year." It sounds as if Tidal is already profitable.

I've got no information about Qobuz, but if Tidal is profitable, there's reason to hope that Qobuz is, too.

Threats remain. Qobuz and Tidal could be bought up by a larger streaming service and integrated or killed off. About a year ago, Apple acquired classical specialist Primephonic. Hopefully, Apple Music is better for it, but Primephonic is no more.

Earlier, I called vinyl sales a sideshow. That might have been ungenerous. As expected, 2021 vinyl-record revenue exceeded CD revenue for the first time since 1987. Vinyl sales reached $1 billion for the first time since 1985. Even adjusted for inflation, that's the highest they've been since 1988. LP revenue was almost 7% of total recorded-music revenue; 83% of revenue was from streaming.

Some lovers of physical media found hope in the apparent recovery of CD sales, which rose in 2021 for the first time since 2012. I fear, though, that their hope is misplaced. CD revenue was up only because it was down during COVID-restricted 2020. CD revenue in 2021 was still well below what it was in 2019.

We're living in a hi-fi golden age, with vast catalogs of music available in high resolution and frequent vinyl reissues (especially jazz) of the highest quality. There are no guarantees, but at the moment, the future looks as golden as the present.

tonykaz's picture

I once had a Bedroom "shelved-out" for organised Music Media Storage, now I have it all in my Shirt Pocket Player Memory devices.

Still, I would like to have access to those Linn Vinyls like the one on the LP12 that's on the Front Cover of the latest Stereophile. Linn and other Europeans have wonderfully unique recordings that I'd love to explore. Streaming will probably provide open access to all of the World's vast collection of recorded Music.

Back in March of 2022, Abyss Staff did a YouTube Video covering ALL the Music Formats that we Audiophiles used and invested-in over the last 70ish years of recorded Music. ( there are quite a few ) Funny thing is that I personally was experienced in most of them and owned gear for a very large percentage . Its an amazing look back to see where we've been and how far we've come.

We ( Stereophile's Staff and readership ) now anticipate a completely differing experience ( I think ) !

Streaming enables us to extrapolate out a Future that seemed unimaginable a Decade Ago at RMAF 2012 !

It feels to me that Streaming is a Moses parting the Red Sea to the unlimited joys of a Musical Promised Land.

I'm leaving 33.3 to the Planet Pharaoh

It's time to move-on!

Tony in Florida

Jack L's picture


But Moses never arrived God's Promised Land as he died in the desert at 120 after spending 40 years there.

Hopefully streaming would not take so long to get to its 'perfection'.

For yours truly, vinyl is still my prime music source. Streaming is truly convenient to update me the current happening of the music world.

Like it or not, streaming is not there yet MUSICALLY, IMO.

Before long, HD Vinyl will turn the page of vinyl big bigtime.

Listening with own ears is believing

Jack L

Glotz's picture

I do hope vinyl release dates can be shortened; I have been noticing 6 months on some releases.

And I really hope these streaming companies come up with a better reimbursement system over time... I see a day when streaming will only allow a set number of plays before one's permissions dries up. I've already experienced it on Qobuz.

I also prefer buying from smaller labels as it avoids putting artists into bondage to make a living.

tonykaz's picture

Super high quality vinyl pellets originate in India ( according to Chad Kassem at Acoustic ).

India has been part of the BRIC Nation trading group ( Brazil Russia India China ).

With Mother Russia supplying India's Petroleum needed to make Vinyl Pellets facing Import Sanction restrictions, it seems doubtful that our 33.3 Pressing Plants will be supplying the super quiet/high quality India vinyl pellet pressings that they were famous for!

Why not re-cycle Goodwill Store records?, of course they won't be "virgin" vinyl.

Phew, the things we sacrifice for our good old fashioned Wars.

Tony in Florida

Anton's picture

Thanks for the warning. I was looking to subscribe.

cognoscente's picture

I see dangers on the sharing economy and/or rental and lease economy. Soon all property rights will be in the hands of a few, as is already the case with (financial) assets. Ownership gives influence and freedom, not availability that is not yours. If it's "sounds" too good to be true, it's too good to be true. So I buy music, like eveything else (and without loans). I'd rather have less, but it's mine. That gives me freedom.

Faizan's picture

Absolutely. And that is why I too will hang on to my data. I've not thrown away the good CDs and tapes either. Why must we lose what was and still is so good. Infact, I bought myself an unused Nakamichi DR-8 cassette deck recently, to turn some DSD and MQA files onto metal and chrome tapes through a DAC running in Class A. The tapes sound excellent played back.

DH's picture

If only the content creators were paid a their fair share of all that revenue....

tiagoramossdg's picture

I remember as a teenager without access to lots of the music in semi-rural Brazil, the advent of Napster and MP3s was a huge thing, allowing me to explore so much music I never suspected existed. I did not have the equipment or the inclination to worry about sound quality then, but that was OK.

Streaming certainly changed things by making nearly all the music I could want available at a low price, and the quality has improved dramatically. It has allowed me to satisfy my musical curiosity and then some.

So why is it that I find myself buying more CDs and vinyl than I ever did before? (Not to mention terabytes of stored music on my home server). The ownership issue seems to play a big role in this. As much as I like to explore, should the streaming services one day go away due to a change in the market's circumstances or my own, I like to know that I have my very favorite music in physical media. I also like to buy CDs in concerts, thus supporting the artists whose work I enjoy, and keeping a cool memento of a live performance.

rt66indierock's picture

Jim you are missing something, operating expenses. Tidal’s operation expenses were from 2016 to 2019 were $74,659,000, $74,922,00, $81,433,000 and 104,707,000. So even if Block Inc reduced operating costs after it acquired Tidal, it would still show a loss. Probably why a pension plan is suing the Board of Block Inc for acquiring it. City of Coral Springs Police Officer’s Pension Plan v. Jack Dorsey and other Board members.

I’ll tell you how I know the operating costs in an upcoming Dear Jim post.

ok's picture

yes, party like it's 1999.

Faizan's picture

A very good article. It really paints a picture. Analog is certainly making a comeback everywhere and the streaming services, lossy and lossless, are helping to take music to its right audience. I, for one, listen to new music all over the place (from SoundCloud and MixCloud to Soulseek downloads, Tidal and Youtube) but I do go and buy high-res AIFF or Wav when I really like something from Beatport or the label itself. And when I really love something, I also order the record, from Bandcamp or MusicDirect.