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February 27, 2013

Digital Sales Drive Recorded Music Industry Revenue

By Amanda Ciccatelli, TMCnet Web Editor

Licensed digital music services and expansion into new international markets has pushed the global recorded music industry into recovery, according to IFPI's annual Digital Music Report.  In fact, industry revenues rose by 0.3 percent to US$16.5 billion in 2012, the first year of growth since 1999. Digital recorded music revenues saw accelerating growth for the second year, up 9 percent to $5.6 billion in 2012 and accounting for 34 percent of global industry revenues, with digital revenue streams, downloads, subscription and advertising on the rise.

"It is hard to remember a year for the recording industry that has begun with such a palpable buzz in the air,” said Frances Moore, chief executive of IFPI, in a statement.

Lately, the digital music business is globalizing quickly as smartphones and licensed services span new markets. In January 2011, major international download and subscription services were present in 23 markets, and today, they are in more than 100. Licensed music services are meeting consumers' needs as  Ipsos MediaCT reported that 62 per cent of internet users have used a licensed music service in the last six months. 

“These are hard-won successes for an industry that has innovated, battled and transformed itself over a decade. They show how the music industry has adapted to the internet world, learned how to meet the needs of consumers and monetized the digital marketplace,” continued Moore.

Image via Metalinsider

In addition, IFPI found that download sales increased in volume by 12 percent globally in 2012 and represent 70 percent of overall digital music revenues. Digital retailers'  global expansion is opening up the potential for markets like Brazil and India, to become major sources of industry growth. According to IFPI in 2011, the major international services were present in 23 countries, and just two years later, they expanded to over 100 countries.

Moreover, consumer satisfaction with licensed music services is high as  77 percent of users of licensed services rate them as excellent, very good or fairly good. And, 57 percent of those who use unlicensed services believe "there are good services available for legally accessing digital music."

However, there are still barriers including competition from unlicensed music services. The priority is to secure cooperation from intermediaries including advertisers, ISPs and search engines, who have a major influence on levels of copyright infringement.

Advertising is a source of funding for unlicensed music services worldwide. Major brands should no longer consider it acceptable to help fund illegal music sites that tarnish their own reputation, as well as helping rig the music market.

Search engines are the first port of call for many Internet users looking for music online. The music industry wants search engines to priorities search results relating to licensed services, but searches for the names of artists followed by the term "mp3" still return a large number of results for illegal sources. In August , Google (News - Alert) announced it would take into account the number of copyright notices it receives when returning search results. A report card issued by RIAA has found Google's actions have showed no demonstrable impact.

ISPs have had a demonstrable effect on levels of copyright infringement on the Internet when required to act. For example, in five European countries where ISPs were required by courts to block access to The Pirate Bay, usage levels fell 69 per cent during 2012. On the other hand, in countries without the block, traffic increased by 45 percent over the same period.

Frances Moore commented, "Our markets remain rigged by illegal free music. This is a problem where governments have a critical role to play, in particular by requiring more cooperation from advertisers, search engines, ISPs and other intermediaries. These companies' activities have a decisive influence in shaping a legitimate digital music business." 

On a brighter note, new music springs from record company investment, which is helping drive a wider digital economy, from social networks to devices, broadcasters and live performance. In fact, each year the recording industry invests 26 percent of its trade revenues ($4.5 billion) in creating talent. 

More recently, music is taking part in powering social media platforms as nine in 10 of the most watched videos on YouTube are music videos, led by PSY's Gangnam Style which has been viewed over 1.2 billion times; nine in 10 of the most liked people on Facebook (News - Alert) are artists, while seven of the top 10 most followed people on Twitter are artists.

Edited by Rich Steeves
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