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Amelia Kaufman/MEDILL

According to the IFPI report, search engines do not do enough to prevent links to illegal sites from appearing on first page search results of artists. (Top five artists in the Billboard Top 100, Feb. 1, 2013)

Digital sales stream new revenues into music industry

by Amelia Kaufman
Feb 26, 2013


Courtesy of Ipsos MediaCT

Consumers are becoming more aware of the legal options available for purchasing and listening to music.

Top-selling digital singles “Call Me Maybe” and “Gangnam Style” have helped save the music industry – or almost. Their contribution last year boosted the industry’s revenue for the first time in a decade.

Digital sales enjoyed a 9 percent increase in 2012 and now accounts for almost 34 percent of revenue- thanks in large part to more consumers downloading and turning to paid or free subscriptions for streaming services such as Spotify or Pandora.

Such growth has been the driving force behind the slight percent increase in the industry’s revenue. Last year revenue totaled at $16.5 billion, according to a report Tuesday by the International Federation of the Phonographic Industry, a London-based industry strategist and data aggregator.

Frances Moore, chief executive of the nonprofit IFPI, noted that “music has not only adapted to the Internet – it is at the very heart of its development.” She suggests in the report that this symbiotic relationship has helped drive technology growth and device sales while boosting outside industries such as T.V. and social networks.

“These are hard-won successes for an industry that has innovated, battled and transformed itself over a decade. They show the music industry has adapted to the Internet world, learned how to meet the needs of consumers and monetized the digital marketplace,” Moore stated in the report.

Scott Ackerman, COO of TuneCore (a digital music catalog) is also optimistic about the growth they have seen in the digital music market space.

"TuneCore Artists are experiencing year-over-year growth from the sale of their music and in 2012 there were 1.2 billion downloads and streams of their music; a 200%+ growth in music streaming," Ackerman said.

"As the availability of digital music for consumers continues to grow, the challenge for artists and those that represent their interests will be the fair pay and royalty collection," Ackerman said.

Stu Bergen, the executive vice president of Warner Music Group, was also cited in the report emphasizing the new revenue streams the digital market has opened up for music companies:

“We have plenty to do and some amazing opportunities ahead of us. Until recently, the vast majority of our revenues came from a handful of countries. Today, digital channels mean we can monetize markets worldwide much more effectively,” Bergen noted.

IFPI, however, still sees many barriers hindering the growth of the industry.

“I believe passionately in the right of artists to earn a living from their craft,” Plácido Domingo, chairman of IFPI, wrote in the report. “It is only if artists and those that invest in them, have their rights promoted in the digital environment that they can continue to make the music we all love. Copyright is the key ingredient to ensure this. Policymakers around the world are now debating how best to protect artists’ rights in the digital age.”

According to the report, advertisers, search engines and other intermediaries have been hurting the industry by funneling traffic to illegal sites – taking profits away from artists. Moore, in her introductory letter, emphasized the need for governments to reform copyright laws.

In the beginning of 2011, only 23 countries had major global music services, such as subscriptions, digital radio and music video streaming. Today, that number has risen to 100. There are more than 500 licensed digital music services globally; 58 of those are in the U.S.

With these greater option, two-thirds of 16 to 64-year-olds have used legal digital music outlets in the past six months. Overall, 62 percent of Internet users use licensed services, increasing global digital revenues by 9.8 percent in 2012.

Download unit sales in the music industry are up 12 percent and paying subscriber numbers have increased 44 percent, according to IFPI’s report.

The U.K., U.S., Germany and Japan have on average had a higher percentage of Internet users pay to download music in comparison with those that use a free or paid subscription service. In Sweden, South Korea and France, even more users have turned to subscriptions, according to Ipsos MediaCT.