Apple Inc. (AAPL), Pandora Media Inc. (P): Is This The Music Industry’s Rebound?

The Savior?

The combination of downloading music and streaming, which did so much damage, may also be the industry’s saving grace. The International Federation of the Phonographic Industry recently reported that digital revenues increased 9% in 2012 and now account for just over a third of the industry’s top line. Additionally, the number of subscribers to streaming music services grew 44%. That’s huge growth and shows that people may again be willing to pay for music if they can consume it the way that they want.

The turnaround

With the slight uptick in sales in 2012, the music industry may be at the point of turning its fortunes around. While this could be a good time for more aggressive investors to jump aboard, the industry’s dark winter brought with it consolidation and privatization, effectively removing pure play music companies from the market.

However, Sony Corporation (ADR) (NYSE:SNE) and Vivendi both have large music arms. Sony, unfortunately, has been struggling to compete with its high-tech gadgets. A too heavy focus on televisions has been a notable mistake in recent years. So a music business resurgence would likely get lost inside the broadly diversified company. This stock is probably best avoided for now and isn’t a great option for a music rebound play, anyway.

Vivendi, however, has a much tighter focus around providing services, notably including distributing entertainment of various types. Music is the third largest division at the company based on revenues. The recent acquisition of EMI also shows the company’s commitment to the space and puts it in position to benefit even more from a potential upturn.

Buying in

Investors interested in participating in the music industry’s potential turnaround should consider Vivendi shares. However, it might also make sense to keep an eye out for music related stocks coming back into the market, as private entities might like to sell into a music business resurgence.

The article Is This The Music Industry’s Rebound? originally appeared on Fool.com and is written by Reuben Gregg Brewer.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.