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Spotify at Year 1 in the U.S.: The digital market is up

July 24, 2012|By Todd Martens
  • Spotify's birthday card.
Spotify's birthday card. (Spotify )

Spotify, the popular Swedish streaming and subscription service, celebrates one year of doing business in the U.S. today. To mark the occasion, Spotify shared some numbers with its users via a cutesy emailed graphic. In 12 months, users streamed 13 billion songs in the U.S., a number that includes free streams and those who pay a monthly fee for Spotify's premium service.

Spotify doesn't break out the number of paid users per territory, but the company boasts about 3 million subscribers worldwide out of a total 10 million users. The free service comes with advertising, while a premium, ad-free service runs $10 a month and enables users to listen on mobile devices.

Streaming services generally make less money for the industry than those that sell digital downloads, but the good news for the music biz is that Spotify's U.S. launch hasn't had a cannibalizing effect on the digital music business. In fact, the digital market has only grown since Spotify's launch. As CD sales continue to decline and fans have pressed play on 13 billion Spotify songs, sales of digital songs and albums remain on the upswing. 

Digital track sales for the first half of 2012 increased 6% over the same period last year, according to recent figures from Nielsen SoundScan. Meanwhile, sales of digital albums were up a mighty 14% for the first six months of the year. Both are expected to end the year with record totals.

The long-term financial viability of streaming services continues to be a matter of debate. Although subscription services are still in their infancy, it is true that they currently generate a fraction of the revenue that could be accrued via a sale. Sales of digital downloads generated about $2.6 billion for the industry in 2011, according to stats released by the industry trade group  RIAA. Revenue from subscription streaming services, meanwhile, stood at $241 million. 

Spotify's first year numbers and SoundScan's midyear stats could calm some nerves, as both digital streams and digital sales are on the rise.  

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