Good Question: How Do We Get Our Music?

MINNEAPOLIS (WCCO) -- Do you stream your songs on your phone? Buy music on iTunes? Maybe you still get CDs?

The recording industry announced this week that Americans have a new favorite way of listening to music.

Streaming music has now taken over the top spot in revenue for the U.S. music industry.

At the end of 2015, the Recording Industry Association of America (RIAA) found streaming makes up 34.3 percent of music revenue, followed by digital downloads, like iTunes (34 percent) and physical sales, like CDs and LPs (29 percent).

"It's pretty alarming," said Gene Munster, managing director and senior research analyst at Piper Jaffray. "Ten years ago, people really saw value in holding onto things. Today, what's changed is this mentality that getting access to 30 million songs at any time, there's value in that."

Munster says what has also contributed to the rise in streaming services has been smartphone usage and the large data plans that come with them.

"When an artist says I have this out on iTunes, I'm like, 'Oh, do you have it on Spotify, because I don't buy music anymore,'" Minneapolis resident Alexis Moore said.

Of the streaming services, RIAA reports 10.8 million have paid subscriptions -- up from 3.4 million in 2012 -- which brings in $1.2 billion a year.

Other listeners use radio services distributed by SoundExchange (Pandora, Sirius XM), and a final group uses non-subscription, on-demand streaming services, like YouTube, Vevo or ad-supported Spotify.

Cary Sherman, RIAA chairman and CEO, addressed the situation in a blog post.

"While today's data is encouraging, the challenges facing us are significant," Sherman said.

He points out revenue from non-subscription services has been "meager."

"The recording industry hates these changes," Munster said. "The reason why is they used to have ownership of the distribution and they used to be able to charge for that. Today, that's been upended."

Ten years from now, Munster believes streaming will continue to grow. He also thinks there will be more artists because those musicians will be able to create and distribute their own music through more open distribution channels.

Munster also expects the cost of subscription services to increase to partially compensate the record companies.

"The small silver lining is that the music industry has access to more people," he said. "People consume more music because it's easier for them to do that."

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