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Music Sales See First Gain in 13 Years

Digital revenue helps compensate for decline in physical sales

Adele in Hollywood, California.
Mark Davis/WireImage
February 26, 2013 2:30 PM ET

Music sales saw a slight gain in 2012, marking the first rise in revenue in 13 years, according to figures from the International Federation of the Phonographic Industry (IFPI), Reuters reports. The IFPI represents the music industry led by three major labels, Universal, Sony and Warner Music Group.

Although revenues rose just a third of a percent to $16.5 billion, it's the first increase since a peak of $28.6 billion in 1999 – the same year Napster was released.

The New Economics of the Music Industry

Although illegal downloading and the industry's own initial reluctance to embrace the new digital landscape have contributed to dwindling numbers, 2012 marked the first time digital sales compensated for losses in physical revenue, bringing in $5.6 billion and accounting for 34 percent of overall income. Physical sales accounted for 58 percent, down from 61 percent in 2011. Download sales came in at 4.3 billion units globally, a 12 percent increase, while digital albums rose 17 percent, with 207 million sold. 

"At the beginning of the digital revolution it was a common theme to say digital is killing music," said Edgar Berger, president and CEO, international, at Sony Music Entertainment. "Well the reality is, digital is saving music. I absolutely believe that this marks the start of a global growth story. The industry has every reason to be optimistic about its future." 

Another major factor is the rise of subscription streaming services like Deezer and Spotify – the latter saw an increase in subscribers from three million to five million in 2012 – which the IFPI expects will soon account for a more than 10 percent share of total digital music revenue. 

With more digital platforms, record labels have also been able to broaden their global reach. "Until recently the vast majority of our revenues came from a handful of countries," said Stu Bergen, head of global marketing for Warner Music Group. "Today, digital channels mean we can monetize markets worldwide much more effectively." 

Despite the slight bumps for the industry, streaming services remain a point of contention as the labels, tech companies and especially artists continue to figure out how revenues should be shared. In recent years, notable acts like the Black Keys, Adele and Taylor Swift have not made their music readily available to streaming services. 

As for the top-selling individual artists in 2012 according to the IFPI, Adele's 2011 effort 21 continued to reign supreme, selling 8.3 million copies. Taylor Swift's Red came in second with 5.2 million; One Direction landed in third and fourth with Up All Night and Take Me Home, selling 4.5 million and 4.4 million, respectively; and Lana Del Rey rounded out the top five with her debut Born to Die moving 3.4 million.

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