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The trade-off of streaming music services’ massive revenue growth is becoming more apparent with each passing year: The business model of buying music, dominant for more than a century, is fading away.

Subscription streaming services, such as Spotify Technology SA and Apple Inc.’s Apple Music, saw a 45.5-per-cent growth in global revenue in 2017, making streaming the recorded music industry’s single-biggest revenue source for the first time. Aside from the well-hyped rebound of vinyl sales and trend-bucking artists such as Adele, Jack White and Taylor Swift, the decline of music as a product consumers can buy has been continuing since Napster knocked the wind out of the CD-centric recorded music industry in 1999.

Record companies got the nickname “labels” from the literal labels they got to stamp onto physical records, but, according to a report released Tuesday by the lobbying group representing labels worldwide, physical ways to buy music are continuing to slide from prominence. The International Federation of the Phonographic Industry, or IFPI, says physical revenue fell 5.4 per cent worldwide in 2017, to US$5.2-billion. That’s versus US$25.2-billion in 1999. In Canada, physical-sales revenue fell 11.2 per cent last year. Downloaded albums and songs are fading even faster, with revenue down 20.5 per cent in 2017 globally and 23 per cent in Canada.

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Such are the growing pains that come with a whole new paradigm for consuming music. The recorded music industry brought in US$17.3-billion last year, up 8.1 per cent from the year prior, as consumers showed a growing willingness to subscribe to massive libraries of songs rather than own individual pieces of music.

Total Canadian recorded-music revenue grew even more last year, up 14.4 per cent to US$439-million – in large part thanks to 68.8-per-cent growth in subscription streaming revenue, totalling US$161-million.

“As streaming continues its rise, it’s more important than ever that this business model supports the people making the music,” said Graham Henderson, chief executive of Music Canada, the Canadian member of IFPI, in an e-mail to The Globe and Mail.

He said internet giants such as Google parent Alphabet Inc. have grown to enjoy massive wealth at the same time as they control huge swaths of digital content, and suggested that the powers of such companies must be kept in check. “Any future legislation, including the current Copyright Act review, needs to keep the well-being and future of Canadian creators top of mind.”

Many artists regularly criticize the way money is distributed from streaming, arguing that the per-stream revenue don’t add up to nearly as much as sales once offered them. While some services, such as SoundCloud, have changed the playing field for genre-bending independent musicians to break into the mainstream, Spotify revealed in a corporate filing earlier this year that 87 per cent of its streams are from artists signed to Universal Music Group, Sony Music Entertainment and Warner Music Group – the “big three” labels that already wield much of the record industry’s power.

Despite contention over how the revenue is divided, the pot itself keeps growing because of the medium: 2017 marked the third year of global revenue growth in the recorded-music industry after nearly two decades of languishing. The world had 176 million streaming subscribers by the end of 2017, the IFPI said in its 2018 Global Music Report – 64 million of whom had just signed up that year. With industry leader Spotify having listed publicly earlier this month, streaming has a chance to gain even further public traction: Its market cap is billions more than the IFPI’s revenue figures.


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