According to PricewaterhouseCoopers projected figures shared with Digital Music News, revenue from physical formats is falling at a (compound annual) rate of —12.3%. That’s a drop from $1.8 billion in 2015 to just under $1 billion in 2020. But that’s nothing compared to paid download: according to the forecasted figures, paid music downloads will fall at a (compound annual) rate of —14.3%, from $2.3 billion in 2015 to just over $1 billion in 2020.
These projections suggest that by 2020, the revenue that paid downloads and physical music generate for the music business will be nearly neck-and-neck. This can be seen clearly on the graphics below.
Last years physical sales decreased due to the increase in digital downlads. But now, paid digital downloads are declining very quickly after a relatively short-lived ascent. Revenue from paid downloads in the US is predicted to fall to just over $1 billion by 2020, or in other words, it will drop by more than 50% from the current $2.3 billion in just 5 years.
What is the reason for this steep digital downloads revenue decrease?
After Spotify launched in the US in July of 2011, the music fans can listen to millions of songs legally. There was a massive movement away from the pirate sites, but along with that there was a big decline in the paid downloads.
According to PcW prediction, the following dependency is present: as the revenue from the streaming services goes up, the revenue from the paid downloads and physical sales goes down. So, the rise of the free streaming services is one of the major factors that negatively impact paid downloads.
If the rumors of Apple eliminating music downloads from iTunes in 2-3 years happen to be true, that drop could be more severe. Meanwhile — here in 2016 — streaming is already the biggest single revenue generator for the US recording industry, and one of the only increasing forms music consumption alongside live music and vinyl.