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CDs and vinyl are more popular than digital downloads once again

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But the big story is limited streaming services

British Record Shops See A Vinyl Revival Photo by Matt Cardy/Getty Images

Streaming music is taking over the recording industry, and there’s no clearer sign of it than this: digital download sales have fallen so much in the past few years that they’re now smaller than sales of CDs, vinyl, and other physical media, which hasn’t been the case since 2011.

The stats, which come from the RIAA’s newly released 2017 year end report, show that digital downloads fell to $1.3 billion last year, whereas physical media, while also falling, only declined to $1.5 billion.

Of course, both pale in comparison to revenue brought in from streaming, which has taken over the music industry in recent years. In 2016, the music industry made more than half of its revenue from streaming for the first time, and that growth continued into 2017. Last year, nearly two-thirds of all revenue — over $5.7 billion — came from streaming, an increase of 43 percent.

Four year growth in premium music subscription
Units show millions of subscribers.
Image: RIAA

That’s due to the increasing popularity of subscription services like Spotify and Apple Music. But as it turns out, there’s a fast growing new category of streaming services that could soon be a very big deal for the industry. They’re called “limited tier paid subscriptions,” and they’re basically subscription streaming services with some sort of major constraint. Amazon, for instance, sells a $4 per month unlimited music subscription that only works on a single Echo. Pandora’s paid radio service, Pandora Plus, also falls into this category.

Despite the lack of attention on this category, it represented 14 percent of the subscription market in 2017, up from 11 percent in 2016. That may sound tiny, but it represents a 125 percent year-over-year growth in terms of revenue, growing from $263 million to $592 million — bigger than vinyl. That’s huge for a segment that may well be growing largely due to the ballooning popularity of the Echo. Amazon’s streaming service didn’t go live until the end of 2016, so it’s likely responsible for a large part of that growth.

In a statement to The Verge, Amazon Music vice president Steve Boom said that the total hours of music streamed using Alexa-enabled devices has already doubled this year. “In the US, we’ve seen more than half of Amazon Music listeners used voice year to date, and compared to this period last year, we’ve already seen that the total hours streamed on Amazon Music via Alexa-enabled devices have doubled in the US. Amazon Music listeners love listening to music with Alexa,” Boom said.

Paid subscription revenue on its own was up 55 percent last year, and ad-supported streaming revenue was up 35 percent. Their continued growth has led to overall revenue growth for the music industry for the second year in a row, bringing it to $8.7 billion. That’s a return to 2008 levels, which is a bright sign for the industry, especially since subscription services show no sign of slowing. But as the RIAA notes, the industry’s revenue is still 40 percent below peak levels, and physical sales and digital downloads still have farther to fall.