Music Sales Are Growing Again as Streaming Trumps Piracy

Music Industry gains
Music Industry gains

The music industry isn't dying after all.

The International Federation of the Phonographic Industry revealed last week that global recorded music revenue rose an estimated 0.3 percent last year to $16.5 billion.

The marginal uptick may not seem like much, but you have to go all the way back to 1999 to find the last time that music industry revenue rose at all. This is news so big that the record labels should be singing about it.

Mobile on the Move

The digital revolution is a big part of the industry's success. The popularity of downloads, streams, and subscription services is kicking in some serious coin into the industry's tip jar. Digital revenue climbed 9 percent to account for more than a third of the industry's total revenue.

The CD is dying, but for the first time ever the growth in digital music was actually enough to offset the decline in physical purchases.

This is good news, but it actually gets even better.

Avast, Ye Scallywag Pirates

Piracy has been a thorn in the industry's side for ages, but the Internet made it far worse. Now, instead of worrying about concert bootlegs, mix tapes, or folks recording songs off the radio, record labels must contend with the Internet and peer-to-peer file-sharing sites that make it virtually effortless to share pristine digital music files.

%VIRTUAL-pullquote-Research firm NPD Group reports that the volume of illegally downloaded music on peer-to-peer websites fell 17 percent last year.%The industry has gone after people for uploading and downloading music, and will continue to, but in a welcome development it seems as if piracy itself is on the decline.

Research firm NPD Group reports that the volume of illegally downloaded music on peer-to-peer websites fell 17 percent last year. The decline was even more pronounced in traffic to digital locker services.

This probably isn't a surprise. The growing popularity of free ad-supported streams -- from leading streaming website Pandora (P) to Google's (GOOG) YouTube music videos -- are making it easy to listen to free music legally, with advertisers paying the artists, songwriters, and labels.

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A Nielsen's Music 360 survey last year showed that 64 percent of participants between the ages of 13 and 17 turn to YouTube for music. Meanwhile, Pandora served up 1.39 billion hours of content last month -- a 47 percent spike over the past year.

Rock On

Digital music advocates have always argued that the industry's wider embrace of new technology would eventually help musicians and their labels get noticed. Things didn't exactly pan out that way during the first few years of piracy and iPods, but today the combination of music discovery websites and the emergence of viral videos has helped.

The top song on Billboard's Hot 100 this past week -- Baauer's "Harlem Shake" -- wouldn't have even charted if it wasn't for this month's viral video craze that has seen more than 100,000 versions of the trippy dance routine uploaded to YouTube. The industry is back because it warmed up to the digital revolution. And the beat goes on.

Motley Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. His band Paris By Air was once signed to a major record label. The Motley Fool recommends Google. The Motley Fool owns shares of Google. Try any of our newsletter services free for 30 days.