UK slips to fourth place in global music sales

Salamander Davoudi 03/28/11  Financial Times

he UK has been knocked off its perch as the third largest music market in the world after physical sales of CDs slumped by almost a fifth last year.

Despite reporting growth in digital music sales of 19.6 per cent, overall music revenues fell 11 per cent year-on-year pushing the UK market into the fourth place behind the US, Japan and Germany.

A report by the International Federation of the Phonographic Industry (IFPI), which represents the global recording industry, revealed that the UK saw sales of physical CDs slump by 19.2 per cent in 2010.

In contrast, physical sales still account for 81 per cent of total music revenues in Germany, the highest proportion in Western Europe after Portugal.

“A number of factors underpin the relative stability of Germany’s retail landscape – there have been no systematic store closures, cannibalisation rates from online piracy are lower, consumer behaviour tends to be more conservative and retail prices have been more stable,” according to the report.

IFPI also revealed that global sales of recorded music fell by 8.4 per cent or about $1.45bn to $15.9bn.

Global revenue from digital music sales grew by 5.3 per cent to $4.6bn and now accounts for almost one third of all sales of recorded music. But the rate of digital revenue growth halved last year despite increased action on behalf of governments to tackle digital piracy globally.

The US and Japan remain the world’s two largest music markets and together accounted for 57 per cent of the global decline in music revenues. In 2009 these countries accounted for 80 per cent of the global decline.

In the US overall music sales fell by 10 per cent with physical sales down 20 per cent to just over $2bn. Revenue from digital music sales was relatively flat.

Japan saw an overall market decline of 8.3 per cent.

In Europe digital revenue growth increased significantly by 21.6 per cent with most main markets – including Germany, France, Italy and the Netherlands – seeing double digit increases.

“The demand for new music seems as insatiable and diverse as ever, and record companies continue to meet it,” said Frances Moore, chief executive of the IFPI. “But they are operating at only a fraction of their potential because of a difficult environment dominated by piracy.”

Of the major markets ranking in the top 20 by size, just three saw year-on-year sales increases with Korea up 11.7 per cent, India up 16.5 per cent and Mexico up 0.9 per cent.

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.

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.

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