Piracy damaging music sales acutely?

The IFPI has published its digital music report 2010 and claims that new licensing deals help push digital music sales to 27% of global revenues – but piracy is damaging investment in artists.  The organisation says that piracy is damaging releases, sales and investment in France, Spain and Brazil in particular. As a direct result of this, the IFPI calls for urgent legislation to curb piracy on ISP networks. The full report provides an overview of the music industry’s changing business models, outlines the impact of digital piracy internationally, and reviews the efforts of governments to address it.

More than a quarter of all recorded music industry revenues worldwide are now coming from digital channels, as music companies license music in partnership with ISPs and mobile operators, subscription services, streaming sites and hundreds of download stores. However, despite the continuing growth of the digital music business – with trade revenues up 12% to an estimated US$4.2 billion in 2009 – illegal file-sharing and other forms of online piracy are eroding investment and sales of local music in major markets. In particular, three countries known for the historic vibrancy and influence of their music and musicians – Spain, France, Brazil – are suffering acutely, with local artist album sales or the number of releases plummeting.

The IFPI says that although some progress is made to fight piracy the progress is too slow. The report outlines how music companies are diversifying their revenue streams, offering new ways for consumers to buy and access music. These include: subscription services; music services bundled with devices and broadband subscriptions; streaming services with applications for mobile devices; advertising-supported services that offer premium services and online music video services.

In the last year, music companies have partnered with advertising – supported services such as Spotify, Deezer, MySpace Music and We7; ISPs such as TDC in Denmark, Terra in Brazil and Sky in the UK; mobile operators such as Vodafone; handset makers such as Nokia and Sony Ericsson; and online video channels such as Hulu and VEVO.

Here’s more detailed information from the press release:

Sales of music downloads, the dominant revenue stream in digital music, are seeing steady growth. Single track download sales increased by an estimated 10%, while digital albums rose an estimated 20% in 2009. Recent innovations in this sector include the introduction of variable pricing, which has increased the conversion of track purchases to album sales, as well as the launch of the iTunes LP and the rollout of DRM-free downloads internationally.

New figures show piracy is harming investment in local talent

Despite this progress, piracy is the major barrier to growth of the legitimate digital music sector and is causing severe damage to local music industries around the world. Providing new evidence of this, three of the world’s biggest music markets, all heavily dependent on local repertoire – France, Spain and Brazil – have seen a sharp slump in the fortunes of their local music industries:

• In Spain, which has one of the highest rates of illegal file-sharing in Europe, sales by local artists in the top 50 have fallen by an estimated 65% between 2004 and 2009;
• France, where a quarter of the internet population downloads illegally, has seen local artist album releases fall by 60% between 2003 and 2009;
• In Brazil, full priced major label local album releases from the five largest music companies in 2008 were down 80% from their 2005 level.

The report shows that, while the music industry has increased its digital revenues by 940% since 2004, piracy has been the major factor behind the overall global market decline of around 30% in the same period. Overall, global music sales in the first half of 2009 were down by 12% (physical and digital sales) and full year figures are likely to see a similar trend.

Third party studies overwhelmingly conclude that the net impact of illegal file-sharing is to depress sales of music. Two surveys confirmed this in 2009 – by Jupiter Research, covering five European countries, and Harris Interactive, covering the UK. According to Jupiter, around one in five internet users in Europe (21%) shares unauthorised music.

“Climate change” for creative industries

The Report also shows how digital piracy is causing “climate change” across the creative industries. In 2009 the issue rose to the top of the agenda for film and TV producers as well as book publishers. TV programme piracy is estimated to be growing faster than in music, according to research firm Big Champagne. Meanwhile, the film industry estimates illegal film streams and downloads account for 40% of its piracy problem by volume (MPAA).

The Report calls for the urgent adoption of laws to curb P2P and other forms of online piracy – including the “graduated response” by which ISPs would cooperate with right holders in deterring illegal file-sharing on their networks.

Introducing the Report, IFPI chairman and CEO John Kennedy, said: “Music fans today can acquire tracks and albums in ways not conceivable a few years ago – from download stores, streaming sites, subscription services, free-to-user sites, bundled with their broadband or a mobile phone handset.

“It would be great to report that these innovations have been rewarded by market growth, more investment in artists, more jobs. Sadly that is not the case. Digital piracy remains a huge barrier to market growth and is causing a steady erosion of investment in local music. The collapse in sales and investment in France, Spain and Brazil, countries with traditionally vibrant music cultures, testify to this and are a warning to the rest of the world.

“In 2009 the mood has crucially changed. It is now accepted that this is about the future of a broad base of creative industries that have huge economic importance and employ vast numbers of people. Governments, led by France, South Korea, Taiwan, the UK and New Zealand led the way in 2009 by adopting or proposing legislation to tackle piracy. It is vital these efforts are seen through to their conclusion and followed by other governments in 2010.” via RESOURCES – IFPI publishes Digital Music Report 2010.