We7

This is Celia Hirschman with On the Beat for KCRW.

The music industry's road forward is clearly digital. Physical music sales have been steadily plummeting over the last few years, while digital sales have been growing, almost exponentially. It's only a matter of time before digital reigns supreme in music sales. And while this is great news for an industry in crisis, it's unlikely digital music will ever deliver the kind of sales that the record industry has been accustomed to.

But there is good news. BPI, the British Phonograph Institute, released a report last week that indicated UK music sales have finally seen an increase, after six years of a downward spiral. While the rise in UK music sales was a modest 1.4%, much more growth is anticipated.

A couple of factors contributed significantly to this upswing. Last year, hot selling records from Susan Boyle, Lady Gaga, and Robbie Williams plus all those reissued Beatles' albums made the sales difference. In addition, the rise in online models, like the UK streaming company, We7 made a large contribution.

We7 is an advertising based free music-streaming web site, co-founded by Peter Gabriel. We7's ads, called “blipverts” are short commercials that play before songs. They currently have over 3 million users. We7 has done a great job supporting themselves and the artists they stream. While several other web companies have attempted this feat, they've either been shut down or bought out by larger companies. Last.fm, a US-based streaming site was bought by CBS a couple years ago. Lala another streaming site was acquired by Apple and was just shut down last week. The same story applies to iMeem, which was bought by MySpace and then shut down. In fact, in the UK, the only real competition that We7 faces is the music streaming company Spotify.

Spotify boasts 5 million users across Europe. And while Spotify is beloved by many, the music industry is a bit more cautious. Overseas, they've earned a reputation of shorting artists their full due. Last year, a Swedish newspaper accused Spotify of only paying Lady Gaga $167 for over 1 million plays of her hit “Poker Face”. And independent artists and labels have also complained about the inequities of Spotify's royalty payments.

In contrast We7 claims to pay industry standard royalties to the artists they represent.

These growing pains help set the market for a business in enormous transition. Regardless of who wins the race for dominance, it's likely that streaming will come to the forefront of music consumption in the not too distant future. And as technology catches up with the possibilities of streaming music, we are perched on the precipice of a entirely new generation who may never know a CD.

This is Celia Hirschman with On the Beat for KCRW.