IFPI Digital Music Report

Digital studio The report is international and looks across the pond for emerging trends as well as in the UK.

An incredible revolution is sweeping the music industry and in the pages of this report you will read how record companies are adapting their business to the dramatic changes brought about by the digital age. In the US, only five years after the commercial music download business first emerged, 30 per cent of all recorded music sold is online or mobile.

Digital sales now account for around 10% of the music market as record companies experiment and innovate with an array of business models and digital music products, involving hundreds of licensing partners.

However, despite this success, digital music has not yet achieved the ‘holy grail’ of compensating for the decline in CD sales. Meanwhile, digital piracy and the devaluation of music content are a real threat to the emerging digital music business.

IFPI Digital Music Report

Tasters from the report:

• Digital music sales estimated to double to around US$2 billion in 2006. Record labels have become digitally literate companies, selling music online or through mobile phones.
• Single track downloads estimated up 89% at 795 million.
  Along with mastertones they remain the main digital music formats, but other formats, such as mobile downloads, digital albums, music videos and ringback tones also saw growth.
• Available tracks have doubled to four million, via 500 online services in over 40 countries worldwide. This compares to around 150,000 CD albums available in the biggest 'bricks and mortar' music stores.
• New revenue streams and business models emerge.
  Social networking sites exploded in popularity while advertising-supported models such as video licensing on Yahoo! Music and MSN emerged as a potential revenue stream for record companies. Music video has become a revenue stream in its own right.
• Lawsuits  impact illegal file-sharing, but ‘gatekeeper’ ISPs must act to curb digital piracy.
  Legal action was taken against more than 10,000 uploaders in 18 countries in 2006 including Brazil, Mexico, Poland and Portugal for the first time, but illegal file-sharing in Europe has generally been contained in the last year.
• Advertising-funded models have become a new revenue stream for record companies as advertisers diverted budgets to the Internet which is forecast to overtake traditional radio advertising in 2009 (Zenith OptiMedia).
• Digital is boosting classical music. Classical music was the fastest-growing music genre in the US, growing by 23 % with exceptional digital sales on particular classical titles.

Quotes

"Music subscription services have experienced tremendous growth, but are constrained by closed hardware and the absence of a healthy compatible device market."
Chris Gorog, CEO, Napster

“Our experience has shown that the key to harnessing the vast digital opportunity is ensuring innovation remains our guiding principle.”
Patrick Vien, Chairman and CEO, Warner Music International

"If we in the EU are going to turn Europe into the leading knowledge-based society, then we have to ensure that our young people are both technologically savvy and aware of the basic tenets of intellectual property which protects creative content."
Erika Mann, MEP and Chair of the European Internet Foundation

International Federation of the Phonographic Industry

IFPI CEO, John Kennedy IFPI represents the recording industry worldwide, with a membership comprising some 1400 record companies in around 70 countries. IFPI's mission is to promote the value of recorded music, safeguard the rights of record producers and expand the commercial uses of recorded music in all markets where its members operate. They write an annual Digital Music Report based on the information their market research and international members provide.