IFPI Claims 20 Percent of Fixed Line Internet Users are Music Pirates

The International Federation of the Phonographic Industry (IFPI) has published its annual Digital Music Report 2015, which slams online content platforms like YouTube for not sharing enough of their revenues and claims that 20% of fixed-line Internet users regularly access services that offer pirated music.

The report starts of by noting that global industry revenues were down 0.4% to £10bn ($14.97 billion) in 2014 and that revenues from digital music services have, for the first time, finally matched those from physical format sales. Indeed digital revenues rose 6.9% to £4.62bn ($6.9 billion), which represents 46% of all global music sales.

Frances Moore, CEO of IFPI, said:

“The headline statistics of 2014 speak for themselves, with overall revenues still largely flat, down by 0.4 per cent. Music companies are charting a path to sustainable year-on-year growth. That path was never going to be straight, but we are making great strides along it, embracing new models, licensing, investing and improving consumer choice.”

It’s also interesting to note that legal subscription (Spotify, TIDAL etc.) revenues (+39.0%) offset declining download sales (-8.0%) to drive overall digital revenues, while the number of paying users of subscription services rose 46.4% to an estimated 41 million. Subscription services now represent 23% of the digital market and generate £1.07bn (US$1.6 billion) in trade revenues.

Internet Music Piracy

But as ever the IFPI also warned that there had been some 4 billion music downloads via BitTorrent (P2P File Sharing) alone, with 20% of fixed-line Internet users worldwide believed to be regularly accessing services that offer copyright infringing music.

However the record label trade body also claims that broadband ISPs in 19 countries have now been ordered to block access to more than 480 copyright infringing websites (this often includes BT, Virgin Media, Sky Broadband, TalkTalk and EE in the UK), which they believe is having a positive impact.

Indeed it’s claimed that in the three years since The Pirate Bay (TBP) and numerous other sites were blocked in the United Kingdom, there has been a 45% decline (from 20.4m in April 2012 to 11.2m in April 2014) in visitors from the UK to all BitTorrent sites (whether blocked by ISPs or not). Mind you, legal revenues don’t appear to have improved by much.

But it’s unclear how this data was gathered because piracy sites are often mirrored on separate servers and can frequently be accessed by using different domains and web proxies, which would pollute the visitor statistics and make them appear lower than they might actually be. Never the less it’s not only piracy that takes a kicking from the IFPI today.

Frances Moore added:

“The value gap is a fundamental flaw in our industry’s landscape which sees digital platforms such as Daily Motion and YouTube taking advantage of exemptions from copyright laws that simply should not apply to them.

Laws that were designed to exempt passive hosting companies from liability in the early days of the internet – so-called “safe harbours” – should never be allowed to exempt active digital music services from having to fairly negotiate licences with rights holders.

There should be clarification of the application of “safe harbours” to make it explicit that services that distribute and monetise music should not benefit from them.”

The IFPI highlights an example of the perceived “safe harbour” problem (this rule prevents ISPs from becoming liable for the illegal activity of their customers), which estimates that music subscription services have 41 million paying global subscribers, plus more than 100 million active users in their “freemium” tiers.

The above sector generated revenues to record companies of more than $1.6 billion in 2014, yet by contrast YouTube alone claims more than one billion monthly unique users and is thought to be the world’s most popular access route to music. Yet total global revenues to record companies generated by certain content platforms, including YouTube, amounted to $641 million in 2014, less than half the total amount paid to the industry by subscription services such as Spotify and Deezer.

The United Kingdom’s former Intellectual Property Adviser to the Prime Minister, Mike Weatherley MP, recently highlighted a similar concern (here). Meanwhile ISPs would rightly say that they are “mere conduits” of information and cannot easily or even legally intercept and monitor the content of their customers communications. But how this applies to YouTube, as a content provider, may be trickier to debate.