The subscription business model continues to define the music industry, with the RIAA’s 2024 Year-End Report confirming that paid music subscriptions in the U.S. have surpassed 100 million for the first time. Subscription revenue grew by 5% to $11.7 billion, making up 79% of total streaming revenue and nearly two-thirds of all recorded music revenue.

Total streaming revenue, which includes paid subscriptions, ad-supported streaming, and digital radio services, grew 4% to $14.9 billion, continuing its dominance as the primary revenue driver for the industry. However, ad-supported streaming revenues declined by 2% to $1.8 billion, reinforcing the trend that free tiers are becoming less viable compared to paid offerings.

Despite the overall growth in subscriptions, limited-tier subscriptions—such as Amazon Prime Music and Pandora Plus—declined by 2% to $1 billion. These services, which restrict features such as on-demand access or offline listening, appear to be losing traction as consumers shift toward full-premium options.

Meanwhile, digital music downloads fell 18% to $336 million, further solidifying the end of the ownership model in favor of recurring revenue subscriptions. Downloads now account for just 2% of total U.S. music revenues, compared to 43% in 2012.

INSIDER TAKE

The subscription economy has permanently reshaped the music industry, with streaming services relying almost entirely on recurring revenue. The rise to 100 million paid subscriptions is a significant milestone, but it also signals a maturing market where growth is slowing.

The 5% increase in subscription revenue is largely driven by price increases and multi-user plans, not just new customer acquisition. As major platforms like Spotify, Apple Music, and Amazon Music continue to tweak pricing, the focus is shifting from expanding the customer base to maximizing revenue per subscriber.

The decline in ad-supported streaming revenue signals a larger shift toward monetization via paid subscriptions, a trend seen across the broader subscription economy. Companies outside of music—such as news media, SaaS, and fitness streaming services—should take note: free tiers are becoming harder to sustain, and premium offerings need to deliver strong perceived value to drive conversions.

Additionally, the decline of limited-tier subscriptions suggests a rethink may be necessary for mid-tier pricing strategies. If consumers aren’t seeing enough value in these plans, services may need to either enhance them or eliminate them entirely in favor of a simplified premium model.

For businesses operating in the subscription industry, the key takeaways from the RIAA report are clear:

1. Tiered pricing works, but only if the mid-tier provides enough value to retain customers.
   
   
2. Bundling with other services (e.g., Amazon Prime, telecom partnerships) remains a critical growth strategy.
   
   
3. Ad-supported models are becoming less viable as monetization shifts toward premium experiences.

The shift from one-time purchases to recurring revenue is now complete in the music industry—and other subscription businesses should study these trends closely to stay ahead.