Streaming music revenue rockets 40 percent in 2012

Across the globe, revenue gained from music streaming services will increase by 40 percent, according to the latest Strategy Analytics Global Recorded Music Forecastreport.

The forecast suggests that online streaming revenues will grow at almost 5 times the rate of standard download revenues across the globe, due to the rise of streaming services.

Global streaming revenues are expected to increase by 40 percent in 2012 -- to $1.1 billion -- while revenues for song downloads from services including Apple's iTunes will only increase by 8.5 percent. However, as one of the leading sources of music digitally, the total revenue stream remains higher for online stores, topping $3.9 billion.

However, Strategy Analytics believes that streaming services are close to taking over as the "leading revenue growth engine", which means the concept will continue to generate additional income -- an extra $311 million this year, $8 million more than downloads at $303 million.

The analytics firm believes that overall digital spending on music -- including mobile services -- will increase by 17.8 percent in 2012, generating an additional $1.3 billion in income, rising to the total of $8.6 billion. However, despite a decline in physical sales, it still dominates digital, holding a predicted market share of 61 percent. Digital sales will therefore hold a market share of 39 percent in 2012.

Physical sales, including CDs, are expected to decline by 12.1 percent ($1.9 billion), in comparison to digital music sales which are predicted to increase by 17.8 percent ($1.3 billion).

Strategy Analytics forecasts that by 2015, digital music sales will overtake the physical market share. However, in countries including the U.S., Sweden and South Korea, the transition is expected to take place at a quicker pace.

Ed Barton, Strategy Analytics' Director of Digital Media, believes that the digital trend exists because people are "increasingly valuing accessibility and availability over actual ownership of digital music". He noted:

"Although downloads still account for nearly 80 per cent of online music revenues, this market is maturing and spending is flattening in all key territories. Streaming music services such as Spotify and Pandora will be the key growth drivers over the next five years as usage and spending grow rapidly.

Additionally, the emergence of cloud storage of a subscriber's existing music library for seamless streaming to a range of connectable devices improves the value proposition further."

In the U.S., streaming revenues are expected to grow at four times the rate of downloads -- 27.8 percent in comparison to 6.7 percent respectively. If this prediction rings true, then online streaming and downloads will account for double the share of music spending in the U.S. than the current global trend (41 percent against 22 percent). Physical music sales are expected to decrease by 9 percent in 2012, and so digital sales will overtake the sale of CDs this year in the United States rather than in 2015.