Digital Music in 2012: Optimism Justified. Complacency not Accepted

Looking through the pages of this latest IFPI Digital Music Report, you see a striking paradox: on one hand, there is the innovation and drive of a business that has led the way for creative industries in adapting to the digital age; on the other hand, the extraordinarily difficult environment in which these changes are taking place. This is the ninth report that we at IFPI have produced documenting the evolution of the digital music sector worldwide. It has been a challenging and often painful transition, but as we enter 2012, there are reasons for real optimism. The digital music business has now reached out to encompass the globe. The largest international legitimate digital music services are present today in no fewer than 58 countries this number has more than doubled in the last twelve months.
Consumer choice has been revolutionised, as new models for consuming and accessing music are rolled out in new and existing markets. The number of paying subscribers to services such as Spotify and Deezer has leapt in the last twelve months, from an estimated eight to more than 13 million. At the same time, cloud- based services, such as iTunes Match, have become a reality in the marketplace, helping drive the popularity of music downloading. With a healthy 8 per cent increase in our digital revenues in 2011 the first time the annual growth rate has risen since records began in 2004 some might feel tempted to say that a troubled era for the music industry is coming to an end. Such complacency now, however, would be a great mistake.
The truth is that record companies are building a successful digital music business in spite of the environment in which they operate, not because of it. Figures in this report show that more than one in four internet users globally regularly access unlicensed sites that contain copyrighted music. This is a startling statistic that captures the challenges we face in developing a sustainable legitimate digital music sector. We are undoubtedly making important progress in changing this environment, dealing with both peer-to-peer (P2P) and other forms of digital piracy. In the US, music and film companies have agreed with ISPs a new copyright alert system. In France, the Hadopi law has been successfully implemented and research shows it is accepted and having an impact on consumer behaviour.
South Korea, a pioneer of anti-piracy legislation which has required an effective role from ISPs in stopping infringement, is seeing continued market health. New Zealand implemented a new graduated response law in 2011 and surveys show it is already affecting consumer behaviour positively. In Europe, a series of successful court actions required ISPs to block access to The Pirate Bay, prompting substantial reductions in users of that service. On top of this, there is a new frontier in our work against piracy. Cooperation from a far wider circle of technology and business partners, from advertisers to search engines, is now needed to deal with the problem. In 2011, we made significant progress with these intermediaries. A ground-breaking three-way collaboration between payment providers, IFPI and the City of London Police has helped cut funding to 62 illegal websites. That is a positive model that can be extended to new forms of piracy in the future.
The role of search engines in relation to piracy will be a key priority in 2012. Google and other search engines are an important access route for those looking for unlicensed music on the internet. Our industry has stepped up cooperation with search engines in the last year, but a lot more cooperation is needed, such as prioritising legitimate sites in search results and helping prevent the funding of illegal sites via advertising.
The music industry has grasped the opportunities of the digital world in a way few, if any, other businesses can claim to have done. Despite the challenges ahead, the optimism for digital music going into 2012 is well-justified. The music industry has grasped the opportunities of the digital world in a way few, if any, other businesses can claim to have done. Our digital revenues, at one- third of industry income (and now more than 50 per cent in the US), substantially surpass those of other creative industries, such as films, books and newspapers. The music business is a dynamic contributor to the digital economy. Yet it can be much more than that, delivering sustainable growth and jobs. This cannot be done through innovation and licensing alone. We need a fair legal environment, effective cooperation from intermediaries and a resolute commitment from governments to use legislation to curb all forms of piracy. These are the priorities we will be pushing for in 2012.

By Frances Moore, chief executive, IFPI
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