The worldwide recorded music industry's revenue dropped 3.9% last year, even as more fans listened to music on internet streaming and subscription services such as Spotify and Pandora.

Global revenue for the industry, whose best-selling album in 2013 was One Direction's "Midnight Memories," totaled $15 billion, a group representing music labels said in a statement today. Digital revenue increased 4.3.%.

At the same time, revenue from internet subscription services soared 51%, passing the $1 billion mark for the first time, according to the report, from the International Federation of the Phonographic Industry, which says U.S. members include Warner Music Group, Universal Music Group, Interscope/Geffen/A&M and Capitol Records.

Worldwide recording industry revenue was dragged down by a 16.7% drop in Japan, the world's second-largest music market, where sales of CDs are only now starting to decline and subscription services are working to establish themselves. The news that digital revenue continued to grow was welcomed by an industry that's spent most of the past decade closing record shops and figuring out how to stem drops in CD sales.

Excluding Japan, the overall global recorded music market was broadly flat, declining in value by 0.1%, according to the report.

That's still a better outcome than the industry could have faced, the federation suggested.

"Even accounting for the difficult situation in Japan, the global recording industry is in a positive phase of its development," said Frances Moore, CEO at London-based IFPI. "Revenues in most major markets have returned to growth. Streaming and subscription services are thriving."

An estimated 28 million people now pay for music-streaming services including Rdio, Spotify and Beats Music -- up from 20 million in 2012 and just 8 million in 2010, according to the group -- and together with ad-supported streams account for 27% of digital revenue, IFPI said.

Downloads make up two-thirds of all digital sales and are helping drive growth in developing markets such as Hong Kong, Slovakia and South Africa, the group said.

There still be pirates
IFPI estimates some 26% of Internet users still regularly access unlicensed music services and said piracy remains the biggest threat to development of legitimate services and investment in artists.

One Direction sold 4 million copies of "Midnight Memories" last year, followed by Eminem's "The Marshal Mathers LP2" and Justin Timberlake's "The 20/20 Experience."

The best-selling single last year was Robin Thicke's "Blurred Lines," followed by Macklemore & Ryan Lewis with "Thrift Shop" and Avicii with "Wake Me Up."

~ Bloomberg News ~