Growth in global music sales halves

By Salamander Davoudi 1/20/11 Financial Times

Growth in sales of digital music halved last year despite increased action on behalf of governments to tackle digital piracy globally.

Revenues from digital music grew 6 per cent to $4.6bn in 2010, down from growth of 12 per cent in 2009, leaving overall music sales down for an 11th successive year. In 2008, the rate of digital growth was 25 per cent.

The figures from The International Federation of the Phonographic Industry, which represents the global recording industry, illustrate the extent to which music companies have been struggling to offset the sharp decline in CD sales for over a decade.

Frances Moore, chief executive of IFPI, said: “As we enter 2011, digital piracy, and the lack of adequate legal tools to fight it, remains the biggest threat to the future of creative industries.”

Digital growth has halved year-on-year since 2008 in spite of the emergence of 400 licensed online music services such as Spotify and an increasing number of countries moving towards legislation to protect copyright.

“Part of this [growth slowdown] is a maturing of the market. In the early days of digital growth it was massive and that can’t continue,” said Gregor Pryor, partner at law firm Reed Smith.

“The concerning thing is that one would hope that level of growth could have continued in some of the less developed markets. The reason it hasn’t is probably because of piracy in those markets.”

After years of lobbying there has been an increasing global focus on file-sharing as governments consider the cost to their economies and prepare to introduce legislation.

Last year saw three countries adopt internet service provider co-operation measures to reduce illegal file sharing – France, South Korea and Ireland. This year, the UK, New Zealand and Malaysia are expected to implement new laws.

Digital music accounted for 29 per cent of record companies’ total revenue in 2010, up from 25 per cent in 2009. Between 2004 and 2010 there has been a 31 per cent decline in the value of the global recorded music industry.

Fewer debut artists are now breaking through globally, according to IFPI. Last year, total sales by debut artists in the global top 50 album chart were only one quarter of the level they achieved in 2003.

In Spain, music sales fell by an estimated 22 per cent last year with no new home-grown artist featured in the country’s top 50 album chart.

The live performance market also offered no guarantee of growing revenues. Box office sales of the world’s top 50 tours fell by 12 per cent in 2010 to $2.9bn, according to Pollstar.

The top touring performers were Bon Jovi, AC/DC, U2, Lady Gaga and Metallica, all acts with extensive catalogues established through record sales. The best selling global digital sales of 2010 include “Bad Romance” by Lady Gaga and “Love the Way You Lie” by Eminem featuring Rhianna.

Spain and Brazil are among the markets most hit by piracy, with 45 per cent and 44 per cent of active internet users using unlicensed services. This compares with an average across the EU top five markets of 23 per cent.

There are signs that the UK’s attempts to tackle piracy could be amended before they are even implemented. BT and TalkTalk, two broadband providers, are challenging the legality of the digital economy act, which was passed in the dying days of the Labour government.

The coalition government is also reviewing intellectual property law relating to the internet. Asked by Julian Huppert, a Liberal Democrat MP, whether the digital economy act might be repealed, Nick Clegg, deputy prime minister, said that he agreed “there are legitimate concerns about the workability of some aspects of the Digital Economy Act. The government are looking actively at those questions now, and we will make an announcement in due course.”

He added: “This government do not believe that people should be able to share content unlawfully but we are disappointed that the industry has not made faster progress towards adapting its business models to meet consumer demand.”

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