Streaming Music Finally Makes More Money Than CDs

Wait, people still buy CDs?

Music services like Spotify and Pandora have reason to celebrate. In 2014, revenue from streaming services outpaced CD sales for the first time, according to a report released Wednesday by the Recording Industry Association of America.

Streaming services accounted for $1.87 billion in revenue, while CDs represented $1.85 billion, the report said. This means that streaming accounted for 27 percent of the total industry revenue in 2014, up from 21 percent the year before.

Overall, the industry's revenue growth was essentially flat between 2013 and 2014, as it has been for five years according to the RIAA.

2014 revenue from streaming services represented a slightly smaller piece of the music industry than digital downloads and overall "physical" sales, which come from CDs, CD singles, super audio CDs, LPs, EPs, vinyl singles, music videos and DVD audio. But there's no doubt that streaming has quickly become a vital part of the marketplace, with a 34 percent increase in revenue from ad-supported services and a 25 percent increase in paid subscription services in 2014 compared to 2013.

While streaming revenue increased, digital downloads -- think albums or singles purchased from the iTunes store -- declined in 2014. That could help explain why Apple purchased Beats for $3 billion last year. The popular headphone maker also runs a streaming service called Beats Music, and Apple is expected to unveil a new streaming service based on Beats Music in June.

Streaming also faces challenges as it becomes more popular and lucrative. A very public feud between Taylor Swift and Spotify last year highlighted cash-flow problems in popular streaming models. They're great for giving consumers access to huge music libraries at minimal cost, but they put less money in artists' hands than traditional album sales.