Good news from Sweden

Ludvig Werner, Managing director, IFPI Sweden

August 2010

Sweden became a good news story for the music industry in 2009, with increasing sales and a new feeling of hope. What were the factors behind the market turnaround and how can the growth be sustained beyond the short-term?

First, the legal environment improved with the introduction of the new "Ipred" law. This came into effect on 1st April 2009 and enabled rights holders, through a court order, to require ISPs to provide the identity of a copyright infringer. High-profile media coverage of the law dated back to February 2009 and there is some evidence that this had an impact on consumers.

Research by GfK, carried out in June 2009 found that 60 per cent of file-sharers stopped or reduced their infringing activity after the introduction of Ipred.

Second, the widely talked about trial and criminal conviction of The Pirate Bay's operators could leave no one in doubt as to the rights and wrongs of online copyright infringement. Broadcasters and newspapers outlined in detail what activity was legal and which broke copyright law. This was unprecedented public education, albeit triggered in an unusual manner.

Third, the legal digital market was stimulated by the launch of Spotify. The service has overtaken iTunes to become the largest digital retailer in Sweden, with more than one million active users in a country of just nine million people. Yet despite the success of the tiered service, iTunes also continued to grow its business, with digital album sales faring particularly well.

In late 2009, Spotify launched its mobile service and announced a partnership with the ISP Telia that saw its service bundled in with some of the company's broadband packages.

The GfK research that identified a fall in illegal file-sharing also found that 49 per cent of those cutting back or stopping infringing activity had moved to Spotify.

The Ipred law and The Pirate Bay verdict were instrumental in creating an opportunity for a shift in behaviour, which was harnessed by Spotify and other legitimate services. In 2009, trade revenues to record companies increased by almost 12 per cent, with digital revenues increasing by almost 120 per cent.

These combined factors continued to have an impact in 2010, with first half figures suggesting further, more modest growth, but without additional legal reform this initial recovery is not likely to be sustainable.

It is certainly far too early to call an end to the crisis that saw the Swedish recording industry's revenues fall from US$287.3 million in 2001 to US$123.4 million in 2008. There is still more to be done to ensure the ISP cooperation that will be necessary to sustain future positive development for all the creative industries.

We want to turn a good news story into the rebuilding of the recorded music industry in Sweden, with all that means for investment in local artists and songwriters.