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Digital Music Sales Are Booming, But Industry Still Cites Piracy Woes

Global digital music revenue has grown 20,900 percent since the music business started keeping count in 2003 – but it still needs government protection to grow further, says the International Federation of the Phonographic Industry (IFPI), the industry’s main trade umbrella.

2009 digital sales hit $4.2 billion, or 27 percent of industry revenue – up from £20 million and a negligible share in 2003 – according to IFPI’s Digital Music Report 2010, published on the eve of the big Midem industry conference in Cannes, from which I will be reporting this weekend.

“It would be great to report these innovations have been rewarded by market growth, more investment in artists, more jobs. Sadly that is not the case,” writes IFPI CEO John Kennedy in the report. “Digital piracy remains a huge barrier to market growth.

“Our global sales fell by around 30 percent from 2004 to 2009, the growth of our digital sales is slowing and even the success stories … will struggle to survive unless we address the fundamental problem of piracy.”

Despite the growth, Kennedy cites gloomy research as evidence…
— 70 percent of music consumption in U.S., UK and France was digital – but “only” 35 percent of revenue (Capgemini).
— “Only” 18 percent of U.S. internet users aged over 13 regularly buy digital music (NPD) – and only eight percent of Europeans (Forrester).

Indeed, despite digital’s growth, overall global sales fell for the tenth consecutive year – digital revenue growth of 12 percent from 2008 exactly matched the drop in physical sales. In this year’s report, the federation even highlights piracy’s impact on other media, like movies and books, seeking to broaden a demand for anti-piracy action…

But Kennedy may get his wish – slowly, governments are coming around to the IFPI’s calls for legislation. Sweden’s IPRED law has discouraged six out of 10 pirates there, France will start issuing warnings and suspension notices to alleged freeloaders starting April and the UK is currently chewing over similar legislation. New Zealand, South Korea and Taiwan have implemented similar measures.

In truth, some mature singles markets are now mostly digital – a surge that has pushed music sales, by volume, to record high (here are UK figures and Sweden; the U.S. is 40 percent digital). But volume doesn’t equal income – digital tracks are cheaper than bits of plastic.

The digital growth over the six years since records began has come from an 11-fold increase in the number of tracks available (11 million) and an eight-fold hike in the number of legal retailers to over 400. But some of the big challenges are building digital in more analogue countries and successfully monetising the unlimited-access services that threaten to usurp a la carte

On which point, much-hyped Spotify is being hailed by many equally as a saviour and as unlikely to make itself pay. The IFPI’s report, interviewing CEO Daniel Ek, reveals: “In the U.S., Spotify

4 Responses to “Digital Music Sales Are Booming, But Industry Still Cites Piracy Woes”

  1. Oxana- Record Companies need all the rights they’re taking to stay afloat. Their business model was entirely based off of physical sales…a number that is steadily going to keep decreasing for a while. If they didn’t have any publishing/touring/merchandise rights they would be making little to no money right now on new artists. If labels don’t get paid, then artists don’t have a chance to reach the level of popularity/sales they could have otherwise. (There have been one, maybe two exceptions in all of history) They rely on each other. If you’re dead set on being a recording artist right now, don’t expect to get direct income from your music…use the opportunities that fame gets you and pursue other ventures (if you feel like you need to generate lots of income).

    Labels are people too. For the most part (except executives), the share of the profits turns out to be pretty fair. Remember that you enter the music industry to capitalize on your music…if you want to maintain total artistic control, do something else to make money.

  2. What needs to occur is a network for artists that wield enough collective might for the artists that own their own rights to publish and do EVERYTHING for themselves through said network.Its THE only way to kill this Vampiric leaching middleman that brings NO value to any aspect of the music world!

  3. oxana_gonzalez

    Give copyright back to the authors

    Actually, copyright law itself is not that complex. The structure behind it is. Collecting societies, music publishers and record companies, who knows what they are doing? Imagine, you’re a small artist who wants to be famous. Sign here, sign here and sign here. Before you know it you don’t have any rights left, including income from gigs and merchandising. It used to be evident that we wanted to reward the creativity of people. Nowadays, it’s not that obvious anymore. My idea is that we should not discuss copyright law, but how to protect the performing, reproduction and any other rights of the music authors. Luckily I’m not the only one who is worried. It can’t be any coincidence that the Featured Artists Coalition was founded. They want the artists to have more control of their music and a much fairer share of the profits it generates in the digital age. But there is also another way. The internet is a promising marketing environment, fit for individual management of copyright and the delivery of rights on demand to users. In these circumstances the music authors are in full control of their rights. And is that not what it used to be all about? Giving the advantages of being creative to such persons? I hope the authors will be more and more aware of the fact that they have a strong legal position.
    Website for D.I.Y music copyright: