A Closer Look At RIAA Claim That Vinyl Sales Generate More Revenue Than Billions Of Ad-Supported Music Streams

[UPDATED] A new RIAA report on the "State Of The Music Business" showed that industry revenue from streaming has surpassed download sales for the first time and reported a small overall revenue uptick. Despite some bright spots, however, the report also singled out income from ad-supported streaming as the industry's major barrier to future growth.

Revenue from the sale of 17 million vinyl records in 2015 surpassed the dollars paid for billions and billions of ad-supported on-demand streams on services like YouTube and Spotify's free tier, according to a new study released by the RIAA. Last year, vinyl revenue topped $416 million compared to $385 million for free ad-supported streams, according to the report.

"This is why we, and so many of our music community brethren, feel that some technology giants have been enriching themselves at the expense of the people who actually create the music," wrote Cary Sherman, Chairman & CEO of the RIAA. "We call this the “value grab” - because some companies take advantage of outdated, market-distorting government rules and regulations to either pay below fair-market rates, or avoid paying for that music altogether… Need further proof that some fundamental market distortions are at play? Last year, 17 million vinyl albums, a legacy format enjoying a bit of a resurgence, generated more revenues than billions and billions of on-demand free streams: $416 million compared to $385 million for on-demand free streams."

Sherman's statements had their intended impact – flashy headlines showing just how unfair the current system of payment to artists and label is:

Artists make more off vinyl sales than streaming services

- New York Post

The Music Industry Made More Money Selling Vinyl Than From YouTube Revenue In 2015

– Int'l Business Times

Vinyl Sales Made More Than YouTube, Spotify and Soundcloud Ads Combined

– Billboard

Is YouTube really ripping off record labels and artists?

– The Independent

A Closer Look At The Numbers

While ad supported streaming needs a second look, Sherman is painting an incomplete picture. The RIAA's vinyl revenue number is based on gross retail sales. On the other hand, the ad supported revenue number is the net amount paid to labels, an RIAA spokesperson confirmed.

GROSS REVENUE

Vinyl $416M vs. Ad-Support Streams $385M

$416 million in 2015 vinyl sales effectively netted creators and rightsholders less than half that after manufacturing, distribution and retail markup. $385 million in streaming income, on the other hand, was not diminished by any of those expenses. The cost of digital delivery to a streaming service is minimal and requires no manufacturing or shipping and far fewer middlemen.

ESTIMATED NET REVENUE

Vinyl $200M vs. Ad-Supported Stream $350M

My conclusions are, of course, just educated guesses. But if we hope to fix the very real revenue problem for artists and the industry, all sides need to begin a dialogue guided by real numbers rather than rhetoric.