The London-based International Federation of the Phonographic Industry (IFPI) has released the statistics for their Digital Music Report, and its more good news for the global music industry which has experienced an overall growth in sales for the first time since 1999, reports Billboard, with IFPI chief executive Frances Moore declaring that the music industry is finally “well on the road to recovery.”
The statistics from the Digital Music Report 2013 unveiled on Tuesday (February 26th) demonstrated how digital sales have contributed to an overall 0.3% rise in global recorded music revenues, with global digital revenue growing by 9%, placing the total global revenue at $16.5 billion in 2012, up from $16.2 billion the previous year.
Which all essentially means that the notion that the digital revolution would kill the music industry has been dispelled, with record labels and industry figures now discovering that by adapting to an internet-savvy future and meeting the demands of consumers, they can still find way to make money and thrive.
Of course they continue to compete with the allure of online music piracy, but new digital business models – most notably streaming services – have helped offset the steady decline of physical sales in CDs and other physical media.
As the NY Times points out, it’s less than half of the $38 billion that the industry took in at its peak over ten years ago, but provides a positive turning point for the industry that many had thought was on a steady, unending decline. Interestingly, that $38 billion peak was in 1999, the same year that Napster was introduced, an obvious landmark in the switch to digital that predates Apple’s i-revolution.
It is in fact digital that has been the significant factor for the up-turn, with statistics revealing more downloads of music (particularly through mobile devices and smartphones), more users signing on for paid subscriptions to on-demand music services like Spotify and Deezer, which combined with other digital sales, accounted for a 12% growth in volume in 2012 to 4.3 billion units globally.“It’s clear that in 2012 the global recording industry has moved onto the road to recovery.” – Frances Moore, IFPI
Subscription services experienced a 44% rise, with 20 million paying subscribers worldwide expecting to help account for 10% of digital music revenues, while traditional download stores – like iTunes, Amazon, and Google and Microsoft’s recently launched services – represented approximately 70% of global digital revenues.
They are part of more than 500 licensed digital music services operating across the globe, and according to Ipsos MediaCT’s survey, 62% of internet users aged 16-64 used a legitimate licensed service in the past 6 months, with digital sales now well and truly the mainstream.
“It’s clear that in 2012 the global recording industry has moved onto the road to recovery,” said IFPI Chief Executive Frances Moore at the London launch of the Digital Music Report. “This has not come about by accident. As an industry we have really changed and adapted our business models to meet the digital world.”
President and CEO International of Sony Music Entertainment, Edgar Berger – who was also in attendance at the launch – shared Moore’s positivity. Saying that “the reality is, digital is saving music.”
“Last year we sat around this table and I made the statement that we were changing from a head wind to tail wind and the reality has proven right. With the wind at our back we are picking up pace and starting to [emerge] from what has been a challenging decade of transition,” Berger stated. “We are clearly on our way and I absolutely believe that this marks the start of the global growth story. The industry has every reason to be optimistic about its future.”
Australia also had a part to play in the Digital Music Report 2013, named as one of 8 of the top 20 global music markets that are expected to see growth in 2013 (alongside Brazil, Canada, Japan, Mexico, Norway and Sweden), reflecting ARIA’s recent reports that Australia had experienced its first growth in 3 years thanks to digital sales.“The reality is, digital is saving music.” – Edgar Berger, Sony Music Entertainment
Additionally, as previously reported, Gotye’s Kimbra-featuring smash hit ‘Somebody That I Used To Know’ was spotlighted as one of the highest selling singles of 2012, shifting 11.8 million units. Gotye’s ubiquitous song falling just behind Carly Rae Jepsen’s ‘Call Me Maybe’ with 12.5 million units and YouTube sensation Psy ‘Gangnam Style’ at 9.7 million units.
The combined sales of those singles in 2012 contributed to 2.3 billion single track downloads worldwide, an increase of 8% on last year, while digital album sales rose 17% with 207 million albums sold, a pace that’s nearly double that of single releases, showing that the digital revolution hasn’t killed the beloved album format.
“This is really a pivotal moment on the path to recovery for our industry,” said IPFI’s Frances Moore, “but it’s still fragile and there are many things that need to be done in order to ensure that that path to recovery continues,” she emphasised.
“The main point remains that we are working in unfair market environment. 31% of internet users are still regularly accessing unlicensed services. How many other industries have to cope with a third of its potential customers being able to get copies of their own products from illegal sources?”
“We believe that the governments should be doing more. The intermediaries can also help – whether they are advertisers, search engines, payment systems or ISPs – either via voluntary agreements, or if necessary, pressure needs to be brought by government,” Moore stated.
One such example the industry has already seen in this regard, is the criticisms that Google has received from both America’s RIAA and England’s BPI, neither satisfied that the search engine giant has revised its search results to demote links to pirated music and illegal downloads, accusing Google of hypocrisy as it rolls out legitimate music payment options on hand, and fails to scupper piracy on the other.
Speaking to The Music Network, Moore specifically noted that digital piracy was still a primary concern in Australia.“If there is a lesson to take away, it is probably that the earlier you can embrace new business models and services, the better.” – Paul Brindley, Music Ally
“Australia does not have a legislative ‘graduated response’ process, not does it have a process to facilitate site blocking,” said Moore, something that will remain an issue when 90% of Australia’s population are gifted high speed broadband internet in the next two years as part of the Federal Governmnet’s roll out of the NBN.
It’s something that Telstra has somewhat foreshadowed, rolling out tests that will ‘shape’ (re: slow down) the speed of their internet users in an effort to ‘improve network management.’ But the telcom titan has come under fire from digital rights and consumer groups, who say that the throttling of access to P2P networks – which often host illegal content – is an act of policing that discriminates against digital content, while potentially prioritising Telstra’s own media services; such as the Big Pond music store, for instance.
Still the results from IFPI’s Digital Music Report show that, while it’s been slow to adapt, the industry’s first growth since 1999 is a positive turning of the corner.
“It’s huge, it’s a milesonte,” Alice Enders, senior analyst at Enders Analysis told the NY Times, saying that while the glory days of booming profits may be gone, robust, profitable endurance is possible with the shift to digital dominance, providing sustainability in new models – such as the ad-supported free models of Spotify and Deezer.
Perhaps the same models that had the big labels adopted earlier in the marker that was Napster’s peer-to-peer revolution back in ’99, they may not have ended up in such a sorry state to begin with.
“If there is a lesson to take away, it is probably that the earlier you can embrace new business models and services, the better,” Paul Brindley, chief executive of consulting firm Music Ally, told the NY Times. “Whether this is signaling a turnaround that will lead to inexorable growth, who knows? But it does at least signal a bottoming out, with room for growth.”
You can view IFPI’s full Digital Music Report 2013 here.