Paid Music Streaming Hit a New Milestone in 2018

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Streaming continues to reshape the global music industry, but more importantly, paid subscriptions continue to march higher and bolster the industry's economics and drive revenue growth across many markets. Spotify (NYSE: SPOT) and Apple (NASDAQ: AAPL) Music are the two largest paid streaming platforms, with 96 million and around 50 million paid subscriptions, respectively. Tencent Music (NYSE: TME) has a massive music-streaming user base, but only 27 million pay for the service.

Those three platforms combined command nearly 60% of global paid subscriptions.

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Paid subscriptions hit 255 million in 2018

The International Federation of the Phonographic Industry (IFPI), an industry trade group that represents the global recording industry, released its Global Music Report 2019 this week, outlining how the industry evolved in 2018. Last year, the recorded music market saw revenue increase 9.7%, marking the fourth consecutive year of growth and the highest growth rate since IFPI started tracking the market over two decades ago.

"This growth was predominantly driven by a 32.9% rise in paid streaming, that now accounts for 37% of total revenue," IFPI writes. There are now 255 million users of paid subscription accounts worldwide, according to the report. Here's a breakdown of revenue from all sources in 2018.

Ad-supported and paid streaming combined brought in $8.9 billion in revenue, representing a whopping 47% of the industry's sales in 2018, up from $6.7 billion in 2017. Expectedly, physical format revenue and download revenue continued to decline -- 10% and 21%, respectively -- as consumers continue to move toward streaming models.

Country highlights

Latin America posted the highest revenue growth of any market at 17%. Spotify is enjoying momentum in that region, which represents 20% of its premium subscribers and 22% of its monthly active users (MAUs). The Swedish company was able to grow its business thanks to a combination of supporting numerous payment options and ongoing smartphone adoption, Spotify Managing Director of Latin America Mia Nygren told Billboard last year. Apple doesn't give much geographical detail around Apple Music, but the lack of a free tier certainly limits adoption.

North America put up strong growth, with sales jumping 14%. That was mostly driven by the U.S., which is the largest music market on Earth. Apple is the market leader in the U.S., but Spotify does have nearly 29 million subscribers in North America. Asia and Australia saw sales grow 12%, with China making its way into the top 10 this year. That's good news for Tencent Music, which operates all of the most popular music apps in the Middle Kingdom.

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Evan Niu, CFA owns shares of Apple and Spotify Technology. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool has a disclosure policy.