Even as Spotify and Apple Music have returned the music business to growth by getting fans to pay, piracy rates remain stubbornly high, according to the record industry’s global trade organization.
The way people pirate music has evolved along with their legitimate listening habits, and piracy is curbing the potential market for subscribers, the International Federation of the Phonographic Industry concluded in a report released Tuesday.
Though 86% of consumers listen to music via on-demand services offered by Spotify Technology SA, Apple Inc. AAPL 1.39% and others, around 38% of them are getting music through copyright-infringing methods, a rate that has remained consistent in recent years, an IFPI spokeswoman said.
Most of those pirating music—32% of the general consumer population—use technology known as “stream ripping.” Stream-ripping websites create an audio file on a user’s computer from a YouTube video or similar source. Such sites typically earn advertising revenue without compensating artists or labels. YouTube didn’t immediately respond to a request for comment.
“Stream ripping also undermines streaming services’ paid tiers that offer offline listening to subscribers,” said the IFPI spokeswoman. “This is stifling growth of the legal music market.”
Record companies have banded together to take action against such stream-ripping sites, and scored a victory in a 2016 suit against one of the largest stream-ripping websites, YouTube-mp3.org.
Global revenue from recorded music grew by 8.1% last year to $17.3 billion, according to IFPI, the industry’s third consecutive year of growth following 15 years of decline amid plummeting physical and digital format sales in an era of rampant piracy.
The rise was almost entirely driven by a 41% surge in streaming revenue, which is now the largest contributor of revenue to the industry thanks to 176 million users of paid services like Spotify.
While revenue for 2017 was still just 68% of the market’s CD-fuelled peak in 1999, industry watchers say the upside for streaming could be much larger with mobile-phone penetration in developing markets and growing familiarity with the services.
IFPI has tracked piracy for several years but changed the size and scope of its consumer-behavior survey this year, making year-over-year direct comparisons unavailable.
Write to Anne Steele at Anne.Steele@wsj.com