Digital music continues to grow, but not enough, says record industry

Jake Widman
Saturday, 23 January 2010 04:34

Your IT - Entertainment

Revenues from digital music channels now account for more than a quarter of recorded music revenues worldwide, according to a report from the International Federation of the Phonographic Industry. But overall revenues continue to fall, and the industry continues to blame piracy.

The claims and figures are found in the IFPI Digital Music Report 2010 (PDF). With sales of downloaded singles up by 10% in 2009 and sales of digital albums up by 20%, worldwide digital music revenues topped US$4.2 billion in 2009, up 12% from the year before. That represents 27% of the total revenue from recorded music.

In fact, digital revenues have increased by 940% by 2004, even as the overall global music market declined by 30% over the same period. Combined digital and physical music sales dropped 12% in just the first half of 2009.

Unsurprisingly, the report places much of the blame for the decline on piracy. P2P networks remain the the primary piracy vector, the report says, but in the last two years the use of such other sources file hosting sites and music blogs has risen sharply.

To bolster its claim that piracy hurts sales, the report cites a Jupiter Research study of consumers in five European countries. The study showed that 21% of Internet users in those countries shared unauthorized music.

The study did find that music sharers were just about half as likely to buy a CD in a store as non-sharers were, and most sharers do not pay for music at all. But drawing the conclusion the IFPI does -- that the net effect of file sharing is negative, contradicting a number of previous studies -- requires assuming that those sharers would be paying for music if they weren't downloading it, as opposed to simply not acquiring music at all.

More ominous is the report's evidence that the sharing of globally popular songs is hurting local music. In France, only 107 albums by local artists were released in the first half of 2009, compared with more than twice that many in the same period of 2003. In Brazil, only 67 full-priced albums by local artists were released in 2008, down from 625 in 1998.

One proposed solution to all this, as usual, is more laws against piracy. The report points to music sales increases in South Korea and Sweden following a "strengthening of the legal environment" in those countries.

The IFPI also touts the potential of ad-supported streaming services like Spotify, which is credited with at least some of the industry's digital revenue growth in Sweden. However, after the news came out in November that a million plays of her hit "Poker Face" had only earned Lady GaGa US$167 from Spotify, it's questionable how strongly artists will embrace such services, even if the record companies do.