Music Downloads Boomed In 2005
Sales of music via the Internet and mobile phones continued to boom in 2005, the recording industry reported Thursday, reaching 6 percent of global record company revenues.
The International Federation of the Phonographic Industry, or IFPI, also called on Internet Service Providers, or ISPs, to join the fight against music piracy, which it claims severely erodes the profits of its 1,450 member record companies across the globe.
The London-based IFPI said that record company revenues reached $1.1 billion in 2005, up from $380 million in 2004. Music fans around the globe downloaded 420 million single tracks in 2005, more than double the 156 million downloaded the previous year.
"2005 was the year that the digital music market took shape," said IFPI Chairman John Kennedy.
The IFPI added that the legitimate music business was gradually gaining ground on digital piracy. It said research showed that in Europe's two biggest digital markets — Britain and Germany — more music fans are now legally downloading music than illegally file-swapping.
A series of lawsuits against piracy by the IFPI have so far largely targeted individual song swappers for breach of copyright rather than ISPs which can claim that they have no knowledge of any piracy occurring on their networks.
Kennedy, who said he approached prominent ISPs a year ago about a coordinated response and has received "effectively a zero response," put them on notice Thursday that the IFPI would consider litigation if they did not join the fight against piracy.
Kennedy said that discussions with the EU in Brussels about introducing legislation were showing "signs of progress." He added that a test would come in May at the Cannes Film Festival when an online charter is scheduled to be signed between ISPs and content providers.
"When some teeth is given to this action, I believe our Internet piracy problem could be dramatically reduced within a very short period of time," he said.
Kennedy said a series of court judgments against unauthorized file-sharers in 2005, including Kazaa and Grokster, in 2005 had helped transform the digital music market.
In the United States alone, single-track downloads doubled year-on-year to 353 million units in 2005, the IPFI said. Album downloads rose to 16 million and accounted for nearly 3% of the total U.S. album market.
In Europe, the United Kingdom led the way with 26 million single-track downloads, followed by Germany (21 million) and France (15 million).
Kennedy said another big success story was sales of mobile phone music, which now account for around 40 percent of record company digital revenues. Original mobile offerings were restricted to ring tones, which have a few notes from original recordings. Providers are now offering so-called master ring tones or real tones, which are excerpts of actual recordings.
"In the cellular or mobile world, there is a culture of payment" that didn't exist in the early days of the Internet, said Adam Klein, EMI's executive vice president for strategy.
"At the start of 2005 the idea of downloading a song to a mobile phone was an idea, by the end of the year it was a reality," added Kennedy.
However, he warned that a lack of "interoperability" of different portable music devices and download systems was hampering future growth in the digital music market. Industry leader Apple Computer Inc.'s iPod portable player and iTunes download system use different technology than other devices.
Industry forecasts for future digital growth vary. Some analysts suggest that 25 percent of record company revenue could come from digital sales by 2010, others put the figure at less than 10 percent.