Riding the digital revolution

I want it all, I want it now and I want it for free - this is the contemporary attitude the global music industry is facing as it battles with the decline of physical CD sales.

The global sales of recorded music continued its downward spiral in 2008. As consumers continued to shy away from purchasing CDs, retailers cut back on their dedicated entertainment floor space, but the final blow came during the critical year-end holiday shopping period when consumer spending plummeted due to the economic downturn.

A recent report by Forrester Research paints a grim outlook for traditional music revenues, but more positively suggests the digital music business could benefit from a shake-up and a reinvention of itself in order to meet consumer demand for new technology.

Undoubtedly, digital downloads will become the logical mass market platform for the future, satisfying all the needs that people have when it comes to music - easy to find, easy to buy, and easy to listen to, regardless of the device.

In 2008, total album sales, including CDs and full-album downloads, were 428 million, a 14 percent drop from 2007.

However, the digital music business internationally grew by around 25 percent to US$3.7 billion. This spike realises that digital platforms now account for around 20 percent of recorded music sales, up from 15 percent in 2007, according to the IFPI Digital Music Report 2009.

Additionally, single track downloads, up 24 percent in 2008 to 1.4 billion units globally, continue to drive the online market, with digital albums also growing steadily (up 36 percent).

These figures, stimulated by a new generation of music subscription services, social networking sites and new licensing channels, such as Nokia Comes With Music, YouTube and MySpace Music, are encouraging and have left some record companies in a position where they can now say they wring a significant profit from online music sites.

However, analysts say despite the growth and promise of digital music the money made online is still far from enough to make up for losses in physical sales. To overcome this steep hurdle in 2009 and beyond, music companies will have to look to new revenue streams to monetise their product and generate multifaceted value from the links between artists and brands.

Despite these developments in the music sector, it can't be ignored that digital music operates in an environment where 95 percent of music downloads remain illegal and unpaid for.

Collating separate studies in 16 countries over a three-year period, IFPI estimates more than 40 billion files were illegally file-shared in 2008.

While there is significant progress being made internationally in getting ISPs to cooperate to curb mass-scale copyright infringement on their networks, the issue of piracy remains at large the biggest challenge for music companies and their commercial partners above all else. In a fresh approach to tackling piracy,the Isle of Man recently launched an initiative to charge a $1.45 weekly tax on behalf of record labels to let citizens download music without penalty.

As the intense battle to fight piracy continues on a global scale it is important for government bodies, ISPs and consumers to act ethically and responsibly through the correct channels, because ignorance is not a viable if there is to be a future for commercial digital content.

Kelly Lewis is the editor of Sound & Stage Middle East.

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