The nearly 20-year depression in the music business is finally over ?

Global music sales grew 3.2% last year, the biggest increase since 1998, according to the International Federation of the Phonographic Industry.

The music industry shrank almost every year in between. CD sales and digital downloads continue to decline. But the savior on the industry’s horizon: streaming services like Spotify or Apple Music. Revenue from streaming grew 45% last year.

And the growth continues. Retail revenue in the U.S., the world’s biggest music market, increased 8.1% in the first half as streaming sales rose 57%, according to the Recording Industry Association of America. The music market is still around half what it was nearly two decades ago, but at least the industry seems to have found a way to get people paying for music. Spotify had 40 million paid subscribers as of September, doubling from June last year. Apple Music has racked up 17 million paying subscribers over the period.

Apple Music, which only joined the fray last year, shares 58% of its revenue with the labels, compared with 55% for the unprofitable Spotify. Other tech giants are also in the race. Amazon and Google are going head-to-head in connected speakers, potentially broadening the streaming market from smartphones to homes. That is a happy tune to the record labels, which take nearly 60% of the streaming platforms’ revenue. Another roughly 15% of the streaming revenue goes to songwriters and music publishers, the biggest of which are also owned by the top record labels.

Compared with the crowded platform market, record labels are more concentrated, with the “big three” labels — Universal Music, Sony Music and Warner Music — controlling 73% of the market. They also stand to earn better margins than selling CDs since the cost to stream one more song is zero.

Since Warner Music is privately owned, this leaves France’s Vivendi, which owns Universal Music, and Sony as the only choices for investors to bet on the trend. Music accounts for around half of Vivendi’s operating profit, a higher percentage than it is for Sony. Vivendi’s television business, however, is a drag. The company’s operating profit in the first half fell 12%, even though its music business grew by a quarter.

On the other hand, Sony’s game business, the company’s biggest segment by revenue, is doing well and has garnered the spotlight of most investors. But Sony’s music segment, anchored by the likes of Adele and Beyoncé, could make up around a quarter of Sony’s operating profit this year. Goldman Sachs said it expects Sony’s recording business to grow an average 7% annually over the next five years, while the operating margin for Sony’s broader music business, which includes publishing, is likely to improve 3.5 percentage points.

This article was originally published on WSJ.

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