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Digital Driving Recorded Music Industry Towards Recovery
Global recorded music industry revenues rose by an estimated 0.3 per cent to US$16.5 billion in 2012, the first year of industry growth since 1999. Digital revenues saw accelerating growth for the second year running, up 9 per cent, with most major digital revenue streams - downloads, subscription and advertising-supported - on the rise. The digital music business is globalising fast, as smartphones and new licensed services span new and emerging markets. In January 2011, the major international download and subscription services were present in 23 markets. Today, they are in more than 100. Licensed music services are demonstrably meeting consumers' needs. New consumer research published today by Ipsos MediaCT, covering nine markets in four continents, shows that 62 per cent of internet users have used a licensed music service in the last six months. Frances Moore, chief executive of IFPI said: "It is hard to remember a year for the recording industry that has begun with such a palpable buzz in the air. These are hard-won successes for an industry that has innovated, battled and transformed itself over a decade. They show how the music industry has adapted to the internet world, learned how to meet the needs of consumers and monetised the digital marketplace." Canadian artist Carly Rae Jepsen topped the 2012 global singles chart with Call Me Maybe. British singer-songwriter Adele achieved phenomenal success with 21, the first album to top the global albums chart for two consecutive years since IFPI began reporting global best sellers in 2001. Despite the optimism, key barriers to further growth remain - the biggest being unfair competition from unlicensed music services. Governments have a key role to play in addressing this problem. The key priority remains to secure effective cooperation from intermediaries including advertisers, ISPs and search engines, who have a major influence on levels of copyright infringement. Report highlights * Global recorded music industry revenues increased by an estimated 0.3 per cent in 2012, the first year of industry growth since 1999, to US$16.5 billion. * Digital revenues increased by an estimated 9 per cent to US$5.6 billion in 2012, now accounting for around 34 per cent of global industry revenues. * Download sales increased in volume by 12 per cent globally in 2012 and represent around 70 per cent of overall digital music revenues. * The number of people paying to use subscription services leapt 44 per cent in 2012 to 20 million. Subscription revenues are expected to account for more than 10 per cent of digital revenues for the first time in 2012. * Digital channels account for the majority of record companies' income in an increasing number of markets including India, Norway, Sweden and the US. * Digital retailers' rapid global expansion is opening up the potential for markets such as Brazil and India, to become major sources of future industry growth. At the start of 2011, the major international services were present in 23 countries. Two years later, they are in more than 100 countries. * Digital music consumption has become mainstream, as shown by consumer research by Ipsos MediaCT across nine markets in four continents. Two-thirds of internet users (62%) have used a licensed digital music service in the past six months. Among younger consumers (aged 16-24) this figure jumps to 81 per cent. * Consumer satisfaction with licensed music services is demonstrably high. 77 per cent of users of licensed services rate them as excellent, very good or fairly good. Even 57 per cent of those who use unlicensed services believe "there are good services available for legally accessing digital music." * Many non-digital revenue channels are also increasing. Performance rights income increased in value by an estimated 9.2 per cent in 2012 and now accounts for around 6 per cent of overall industry revenues, up from 3 per cent in 2007. * Album charts in most markets show that investment in local repertoire is alive and well. In many countries, local repertoire accounts for the vast majority of the top selling albums of the year. Five major non-English language markets illustrate this. In Italy, Spain and Sweden, eight in 10 of the top selling albums of 2012 were by local artists; in Germany, seven in 10, and in France six in 10. Music is an engine of the digital world The flow of new music springs from investment by record companies. This in turn is helping drive a wider digital economy, ranging from social networks to devices, broadcasters and live performance. The recording industry annually invests 26 per cent of its trade revenues (US$4.5 billion) in developing and marketing talent. Music is helping power social media platforms. For example, nine in 10 of the most watched videos of all time on YouTube are music videos, led by PSY's Gangnam Style which has been viewed more than 1.2 billion times. Nine in 10 of the most liked people on Facebook are artists. Seven of the top 10 most followed people on Twitter are artists. Addressing barriers to growth The report highlights major hurdles that need to be addressed to unlock the huge potential for further growth. Illustrating the continued serious impact of internet piracy, IFPI estimates, based on data from both Nielsen and ComScore, that as many as a third of all internet users (32%) still regularly access unlicensed sites. Frances Moore says: "Our markets remain rigged by illegal free music. This is a problem where governments have a critical role to play, in particular by requiring more cooperation from advertisers, search engines, ISPs and other intermediaries. These companies' activities have a decisive influence in shaping a legitimate digital music business." The report highlights where progress was made in addressing barriers to growth in 2012, but also where much more needs to be done. Notably: * Advertising is a major source of funding for unlicensed music services worldwide. Major brands should no longer consider it acceptable to help fund illegal music sites that tarnish their own reputation, as well as helping rig the music market. There have been several well-publicised cases where companies have removed advertising from pirate websites (for example Levi's). * Search engines are the first port of call for many internet users looking for music online. The music industry wants search engines to prioritise search results relating to licensed services, which would be socially responsible and is feasible technically. However, searches for the names of popular artists followed by the term "mp3" still return a large number of results for illegal sources on the first page. In August 2012, Google announced it would take into account the number of valid copyright notices it receives when returning search results. That was a welcome step in principle but unfortunately has not been translated into results. A "report card" issued by IFPI's sister US organisation, RIAA, has found Google's actions have showed no "demonstrable impact". * Internet service providers (ISPs) have had a demonstrable effect on levels of copyright infringement on the internet when required to act. For example, in five European countries where ISPs were required by courts to block access to The Pirate Bay (Netherlands, Belgium, Finland, Italy and UK), usage levels fell 69 per cent during 2012 (ComScore/Nielsen). By contrast, in countries without the block, traffic rose by 45 per cent over the same period.
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