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Piracy problems overshadow rising digital music sales

Piracy accounts for 95 percent of global music downloads. As governments begin to change legislation, legal alternatives are growing fast. But can this be enough to lure music fans back onto the straight and narrow?

A close-up view of two hands on a computer keyboard

The majority of European music downloads are illegal

The recently released IFPI (International Federation of the Phonographic Industry) digital music report 2010 indicated that trade revenues are up 12 percent to an estimated US$4.2 billion in 2009. However, this figure masks a 10 percent overall decrease in music sales across the board. “The elephant in the room here is piracy,” remarked Alex Jacob of the IFPI.

“People are changing their habits but instead of going from buying a CD on the high street to buying a CD from a legal online store like Amazon or iTunes, they're actually going to the illegal file-sharing networks and downloading music there”, he continued.

Illicit sharing accounts for around 95 percent of all worldwide music downloads. In the UK alone it is estimated that the music industry lost 250 million pounds to illegal downloads in 2009.

Local artists suffer

A woman browses in a music shop

Physical album sales have fallen dramatically across Europe

The IFPI report highlights the severe damage piracy is causing to local music industries around the world.

In particular, three countries known for the vibrant music scenes and influential artists - Spain, France and Brazil - are suffering acutely, with local artist album sales and release volumes plummeting.

Spain, which has one of the highest rates of illegal file-sharing in Europe, has seen sales by local artists in the top 50 fall by an estimated 65 percent between 2004 and 2009. In Brazil, full priced local album releases from the five largest music companies in 2008 were down 80 percent from their 2005 level.

Reluctance to intervene

Internet Service providers (ISPs) have little or no interest in curbing this illegal activity as they wish to comfort and entice customers with a promise of safety and freedom. Instead, governments are slowly beginning to intervene with legislation changes.

President Sarkozy of France led the way in 2009 by introducing a ‘graduated response' approach to copyright infringement, whereby users are issued with warnings before any further action is taken.

“If they continue eventually at the end of the line they get to a sanction which could be temporary account suspension”, said Jacob.

More countries are following suit, both Taiwan and South Korea have put new laws on the statute books and legislation is going through parliament in the UK and New Zealand.

Meanwhile a landmark ruling in Italy at the beginning of February this year blocked Italian access to the infamous bit torrent service ‘The Pirate Bay” – a site that facilitates access to a large amount of copyright infringing material.

“It is vital these efforts are seen through to their conclusion and followed by other governments in 2010," said IFPI chairman and CEO John Kennedy.

An iPod and a screenshot of music downloading software

French legislation is designed to push consumers towards legal downloads

Many however are dismayed at the prospect of such state intervention.

“Disconnecting someone's broadband in this day and age is tantamount to throwing somebody outside of society entirely”, says Wendy Grossman a member of the ‘Open Rights Group', a UK based digital rights organization.

“For the questionable crime of downloading a music file it seems totally out of proportion to what the offence might be”, she continued.

Branching out

The IFPI report also highlights how music companies are diversifying their revenue streams, offering new ways for consumers to buy and access music.

These include: subscription services; music services bundled with devices and broadband subscriptions; streaming services with applications for mobile devices; advertising-supported services that offer premium services; and online music video services.

In the last year 400 such services were licensed worldwide. Music companies have partnered with advertising-supported services such as Spotify, Deezer, MySpace Music and We7; ISPs such as TDC in Denmark, Terra in Brazil and Sky in the UK; mobile operators such as Vodafone; handset makers such as Nokia and Sony Ericsson; and online video channels such as Hulu and VEVO.

Spotify in particular has seen great success, attracting 7 million users in 6 different countries over the last 12 months. But this is nowhere near enough to make a dent in the levels of piracy and illegal downloads worldwide.

Lack of foresight

Critics of the big music labels like Wendy Grossman argue that the big record labels should have responded to the great popularity of the first music file-sharing site ‘Napster' back in the early 2000s. The original Napster was shut down in 2001 by court order, but was an immediate hit during its three-year existence

“It should have become obvious to the music industry that the thing they should do is set up something similar that they controlled, if I were in the music industry I would be embarrassed by the fact that Apple is the biggest retailer of digital music, what is this huge opportunity that these guys missed I don't understand what they were thinking!” said Grossman.

Looking to the future

An acoustic guitar and a tuning fork

Have aggressive copyright protection efforts struck the wrong chord with consumers?

Tackling piracy lies in securing a joint effort between governments and ISPs according to the IPFI. This would also allow existing legal services to grow faster, says Jacobs

“Ultimately more choice will be offered to consumers because the amount of money that can be invested in new artists will start increasing again and that means there will be more choice, more diversity of genres for people to choose from – more chance of the band rehearsing in their garage today getting their break”

Jacobs continued to stress that stamping out piracy all together was not on the IFPI's agenda, “We are not that naïve”, he stressed, “We don't need in effect to stamp out piracy, but we can control it”, he said.

Wendy Grossman however, remains skeptical about the effects of meddling with on-line freedom

“From the perspective of the people that the are prosecuting and chasing and berating, they have declared war on an entire generation of consumers and that is a very bad way to conduct a business because they are alienating their customers, and they are not only alienating their customers, they are alienating their best customers.”

Legal alternatives may be starting to win music industry battles, but for the foreseeable future at least the illegal download is winning the war.

Author: Sarah Stolarz
Editor: Sam Edmonds

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