Spotifies Mean Online Now Filling UK’s CD Royalty Gap

WMG's Michael Stipe of R.E.M. singing

One part of the music business has finally reached the fabled tipping point at which digital income offsets declining physical sales.

UK royalty collector PRS For Music, announcing 2009 income, says: “(Digital) growth (£12.8 million) outperformed the decline in traditional CD and DVD formats (down £8.7 million) for the first time, though the legal online music market is still comparatively small.”

Royalty income from online grew a big 72.7 percent (to £30.4 million), “reflecting the increased number of legal licensed digital music services available in the UK and across Europe”.

And this helped push total PRS income up 2.6 percent to £623 million, though most of that effect was contributed from more overseas income, now that PRS is collecting European royalties for some artists and publishers.

The digital tipping point could be a watershed for the industry, which has so far been unable to substitute its shrinking CD sales with rising digital sales…

But these figures refer only to royalty income to songwriters, composers and music publishers – not to the income that labels themselves are experiencing. On that basis, annual digital growth matched the rate of physical-format decline last year – 12 percent – IFPI recently said (though of course the declining segment is larger than the growing one).

Unclear – the extent to which these rises are thanks to Spotify. The popular service, as well as new anti-piracy laws, helped turn income decline in to growth in Sweden last year, and PRS collects royalties from Spotify in the UK and other countries, though neither side will detail terms.

The last couple of years has seen several unlimited-access music services launch, and a few more are due to arrive this year.

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