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Streaming Driving Record Industry Growth, But May Not Be Sustainable

arrows A new report shows UK recorded music industry'revenues grew in 2013 driven by an 11.9% rise in digital revenues driven by digital album sales and streaming. Several U.S. studies have confirmed the record industry's increasing reliance on digital revenues

But another analysis suggests that this impressive growth in streaming is not economically sustainable.

Subscription music services like Spotify and Pandora are on track to double by 2017, according to a new study by Generator Research, but they will never turn a profit. The barrier to profitability for steaming music, according to the analysis, is the 60-70% of revenue each service pays to labels, publishers and artists. 

UK Digital: 50% of revenues, Streaming up 41% 

Overall, the UK recorded music industry saw an 1.9% increase to £730.4 million - up from £716.8 million in 2012, according to the annual BPI report. Digital revenues now account for 50% of UK record industry trade revenues, according to the study

Income from music streaming services such as Spotify and Deezer constituted the fastest-growing sector over the twelve month period.  Streaming revenues increased by 41% - and its three main constituent elements: subscriptions to premium services, ad-supported 'free-to-consumer' streaming, and Cloud-related services combined to generate around £77m for record companies in 2013.

Subscriptions were the most important component, worth £54.7m and accounting for 71% of the sector's income.  Ad-supported services (free streaming), grew 31% over 2012, contributing £19m to industry revenues. Cloud-related services, such as Google, Apple and Amazon's locker services are now beginning to produce meaningful revenues, contributing over £3m to industry income last year.

MORE:  Spotify, Pandora and Other Streaming Music Services Will Never Be Profitable, Says Study