Music biz strikes familiar chord

Global sales down 5% in '06 despite big digital gains

The global recorded music market in 2006 slipped 5% year-over-year to $19.6 billion, according to figures published by the International Federation of the Phonographic Industry. It marks the seventh consecutive year of decline.

Against a backdrop of shrinking CD sales and piracy, the value of physical music shipments tumbled 11% to $17.5 billion last year, the IFPI reported in its Recording Industry in Numbers 2007 study. Digital shipments through mobile services and the 500-plus recognized online music services jumped 85% to $2.1 billion.

The results "reflect an industry in transition," IFPI chairman and CEO John Kennedy said.

"We hoped that the decline in physical sales would be offset by the increase in digital sales, giving us the 'holy grail.' But while digital sales have grown as expected, physical sales have fallen by more than expected," he said.

"Unfortunately, this trend has continued in 2007," he added. "Physical sales continue to drop at a faster pace than we had hoped for, particularly in the U.S. (down 7.3%) and now also in the U.K. (off 6.7%) — a market that had shown incredible resilience."

The lion's share of blame, Kennedy said, should be leveled at piracy, which he described as the biggest problem the industry faces.

Thanks in no small part to the industry's legal actions to shunt copyright pirates, illicit file sharing is relatively stable, he said.

However, with about 20 billion illegal files downloaded last year, the volume of illegally distributed works remains "unsustainably high," he noted. During the same period, 795 million single tracks were legally downloaded online.

Regarding digital shipments, the IFPI tracks online, mobile and subscription services but does not include monophonic and polyphonic ringtone revenue. Digital formats accounted for 11% of total global shipments in 2006, compared with 2% of the overall pie in 2004.

Record labels' income from performance rights collections in 2006 improved 8% to $728 million. "We believe this sector has tremendous potential," Kennedy said. "Synchronization, ad-funded business models and artist/ label joint ventures are also areas showing exciting growth."

Despite the global decline, 12 countries — Japan, Russia, South Africa, South Korea, Ireland, Argentina, Indonesia, Hungary, Malaysia, India, China and Venezuela — posted growth in their respective recorded music markets during the year.

The top 10 respective recorded music markets in the world last year were the U.S., Japan, the U.K., Germany, France, Canada, Australia, Italy, Spain and Mexico.

On digital value alone, the top 10 markets were the U.S., Japan, the U.K., South Korea, France, Germany, Canada, China, Italy and Australia.

Lars Brandle is global news editor at Billboard.
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