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IFPI Reports Digital Music Sales Surge but Blames ISP Internet Piracy for Decline

Posted: 24th Jan, 2012 By: MarkJ

The International Federation of the Phonographic Industry (IFPI) has released its annual Digital Music Report 2012, which reveals that global digital music revenues saw "unprecedented global expansion in 2011" and grew by 8% over the year to hit £3.34 Billion ($5.2bn); a faster rate than 2010. But, despite the huge growth, "illegal" digital music internet piracy by customers of broadband ISPs is still said to be "stunting growth".

According to IFPI/Nielsen, one in four internet users (28%) around the world still regularly access "unlicensed" services. As a result the group continues to advocate a "combination of graduated response [Three-Strikes ISP Warning Letter System], site-blocking and other measures to tackle the problem".

Contradicting this, the IFPI highlights "strong consumer demand" for both single track downloads (up 11% by volume), digital albums (up 24%) and subscription services. The number of users paying to subscribe to a music service (e.g. Spotify, iTunes and Deezer) apparently shot up by 65% in 2011 to 13.4 million worldwide.

Overall 3.6 billion downloads were purchased globally in 2011, an increase of 17% (singles and albums), yet digital sources still only represents 32% of music industry revenues (up from 29% in 2010). The UK alone saw a 10% growth in single track digital music sales.

Frances Moore, CEO of IFPI, said:

"As we enter 2012, there are good reasons for optimism in the world of digital music. Legal services with expanding audiences have reached across the globe and consumer choice has been revolutionised. Meanwhile momentum is building in the fight against piracy as governments and a growing circle of intermediaries engage with our industry.

Any complacency now, however, would be a great mistake. Our digital business is progressing in spite of the environment in which it operates, not because of it. In 2012 the momentum needs to build further. We need legislation from governments with coordinated measures that deal with piracy effectively and in all its forms. We also need more cooperation from online intermediaries such as search engines and advertisers to support the legal digital music business."

Indeed IFPI claims that anti-piracy measures are now proven to boost sales. France's controversial Hadopi law, which is similar to the UK's ever more delayed Digital Economy Act (DEA), is held up as an example.

Apparently P2P (file sharing) piracy levels declined by 26% in France after Hadopi came into effect and analysis by Danaher et al allegedly showed a 23% rise in iTunes sales. On the surface this would appear to be good news, although many would have hoped it to be far higher; especially given the huge costs of such anti-piracy schemes and the alleged scale of such activity.

IFPI Statement on UK Digital Economy Act

In the UK, the Digital Economy Act, which established provisions for a graduated response programme, was passed in April 2010. Implementation has been delayed by a judicial review of the Act [BT and TalkTalk] and development of an implementing code by regulatory body OFCOM.

The UK government has also disappointingly decided not to implement the sections of the Act that deal with website blocking. In the meantime, levels of unauthorised downloading remain high in the UK, despite the presence of more than 70 legal services.

The UK government is attempting to reach a voluntary agreement on an expedited procedure for blocking user access to illegal websites and is committed to implementing the graduated response measures in the Digital Economy Act.

Google also looks to be the industry's next major target, with IFPI blaming the search engine for helping 23% of UK internet users to find illegal music content (an oft repeated claim). Meanwhile anti-piracy investigators used the "latest automated technology" to identify and remove more than 15 million music tracks (infringing links) worldwide (up by 115% from 7 million in 2010).