IFPI publishes Digital Music Report 2008

‘REVOLUTION, INNOVATION, RESPONSIBILITY’

“2007 was the year ISP responsibility started to become an accepted principle. 2008 must be the year it becomes reality”

Governments are starting to accept that Internet Service Providers (ISPs) should take a far bigger role in protecting music on the internet, but urgent action is needed to translate this into reality, a new report from the international music industry says today.

Record companies continued their transition into a digital business in 2007. Music sales via online and mobile channels have risen from zero to an estimated US$2.9 billion – 15 per cent of industry sales - over the last five years, making music more digitally advanced than any entertainment sector except games.

Yet the spread of unlicensed music on ISP networks is choking revenues to record companies and investment in artists, despite a healthy increase in digital sales in 2007, up approximately 40 per cent on the previous year.

ISP cooperation, via systematic disconnection of infringers and the use of filtering technologies, is the most effective way copyright theft can be controlled. Independent estimates say up to 80 per cent of ISP traffic comprises distribution of copyright-infringing files.

The IFPI Digital Music Report 2008 points to French President Sarkozy’s November 2007 plan for ISP cooperation in fighting piracy as a groundbreaking example internationally. Momentum is also gathering in the UK, Sweden and Belgium. The report calls for legislative action by the European Union and other governments where existing discussions between the music industry and record companies fail to progress.

Introducing the Report, IFPI Chairman and CEO John Kennedy says: “A turning tide of opinion is one thing – a concrete programme of action is another. There is only one acceptable moment for ISPs to start taking responsibility for protecting content – and that moment is now. After years of prevarication in the discussion, the French government’s decision to seize the day is deeply refreshing. It shows an urgency of approach that is badly needed in every market where music is today being massively devalued by piracy.”

The report outlines the prospects and challenges for digital music as record companies move from a single format world to one of hundreds of formats and digital products. It shows experimentation with new revenue streams, including advertising-supported models and partnership with social networks. It also outlines the work record companies are doing in artist development and marketing of talent in the digital environment.

There is analysis of the impact of copyright theft on the legitimate music business globally, as well as the strategies of the industry’s anti-piracy actions in disrupting it. The report highlights efforts to develop a legitimate digital music business in China - where digital piracy runs at more than 99 per cent. It also outlines the work done by IFPI to curb pre-release piracy, which threatens producer and artist revenues at the most critical time of an album’s life-cycle.

The report also outlines the hidden dangers to consumers and businesses of illegal downloading, and gives a comprehensive summary of the public education work being done internationally by the record industry to improve awareness of legal online sites and of copyright.

Highlights include:

The first-ever global music download sales chart is topped by Avril Lavigne, who sold 7.3 million track downloads of her song Girlfriend across the world in 2007
Global digital music sales are estimated at approximately US$2.9 billion in 2007, a roughly 40% increase on 2006 (US$2.1 billion)
Single track downloads, the most popular digital music format, grew by 53% to 1.7 billion (including those on digital albums)
Digital sales now account for an estimated 15% of the global music market, up from 11% in 2006 and zero in 2003. In the world’s biggest digital music market, the US, online and mobile sales now account for 30% of all revenues
The music industry is more advanced in terms of digital revenues than any other creative or entertainment industry except games. Its digital share is more than twice that of newspapers (7%), films (3%) and books (2%)
There are more than 500 legitimate digital music services worldwide, offering over 6 million tracks – over four times the stock of a music megastore
Tens of billions of illegal files were swapped in 2007. The ratio of unlicensed tracks downloaded to legal tracks sold is about 20 to 1
Progress in the digital music market is being hampered by lack of interoperability between services and devices, and lack of investment in marketing of new services
The growth rate of around 40% in digital sales did not offset the sharp fall in CD sales globally, meaning that the overall market for the year will be down on 2006
Research by IFPI debunks a myth about illegal P2P services: in fact, fans get better choice on legal sites. IFPI conducted research with a sample of 70 acts on the legal site iTunes and on the copyright infringing service Limewire. In 95 per cent of searches the artists requested had more songs available on iTunes than on the leading P2P service.

Also available:

Full Report
Summary of Report
Quotes from Report
To order hard copies of the report please email laura.childs@ifpi.org

For further information please contact:
Adrian Strain or Alex Jacob at IFPI Communications
Tel: +44 (0)20 7878 7935
Email: press-office@ifpi.org

Notes to Editors:

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.