Digital Music Report 2012

By Michael Lavorgna • Posted: Jan 25, 2012

The IFPI (International Federation of the Phonographic Industry) recently released its “Digital Music Report 2012” that shows a very healthy and growing global digital music market.

Digital music revenues to record companies grew by 8 percent globally in 2011 to an estimated US$5.2 billion. This compares to growth of 5 per cent in 2010 and represents the first time the year-on-year growth rate has increased since IFPI started measuring digital revenues in 2004.

The report goes on to site growth around the global markets:

Digital channels now account for an estimated 32 percent of record company revenues globally, up from 29 per cent in 2010. Some markets now see more than half of their revenues derive from digital channels, including the US (52%), South Korea (53%) and China (71%). IFPI estimates that 3.6 billion downloads were purchased globally in 2011, an increase of 17 per cent (combining singles and album downloads).

Sounds just rosy all over, especially considering the state of the world economy. But things could and should be even better according to the music industry. Roughly 10 of the reports 28 pages of content are devoted to the issue of piracy and illegal file sharing. The music industry continues its pitch that search engines, credit card companies and hosting providers should be required to join in their fight.

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.

Of course the assumption is that if people can no longer download free pirated music from the Internet as easily, they will buy more music. And musicians, music industry professionals, and record companies will make more money. Regardless of how we feel about this point of view, from a music lovers perspective the big takeaway is ever greater access to more music through downloads and streaming services or as the report calls it "Access or Ownership" which appears to be the model of choice going forward for distribution and growth.

Rob Wells, president, global digital business, Universal Music Group, says: “The fact that these two models of consumption can co-exist speaks volumes about the future. In fact, we have really only scratched the surface of digital music in the last decade - now we are starting the real mining, and on a global scale.”

For musicians, this new model does not appear to paint as rosy a picture. I'll let this graph from Information Is Beautiful tell that story (note: this graph was posted on April 13, 2010 so some data may have changed but I think it still works to illustrate the gist of the issue):

Comments

Who's the thief?

Submitted by jazzfan on January 25, 2012 - 2:16pm.

Looking at the graph it would appear that the music industry itself is at least as big a thief as the average online pirateer.

Fascinating graph!

Submitted by deckeda on January 25, 2012 - 6:44pm.

Wow - where to begin? OK, with the obvious.

I see an opportunity for some kind of distribution between the #2 (cdbaby full CD) and #3 (standard retail full CD) even though the chasm is explained by such things as royalty payments in place of production costs, distribution and retailer profit paid on the artists' behalf.

The next comparison, physical CD vs. iTunes "CD" is just frikken' bizarre. Can't tell if labels are keeping more because Apple is keeping more/passing a cost on to labels, or what.

Streaming - that's about right. Just round all that up a zillion required plays before money changes hands. That stuff should be more like radio, i.e. a promotion tool, not a consumer's "full entertainment" model.

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Rob Wells says: "In fact, we have really only scratched the surface of digital music in the last decade ..."

Here's an idea, Mr. Wells. How about engaging me with full discographies on artist's sites, right down to the nitty gritty matrix numbers on LPs. Don't make me Google that stuff. Don't pretend the only version an artist ever did was the CD or iTunes release you currently offer. Educate me why I should maybe care. Treat me like a long term collector; maybe I'll become one. Compete with fan sites (or hell, Wikipedia, even) for publishing nerdy information. Who should know better than you, am I right?

Here's another. Every artist site needs to offer FLAC or Apple Lossless downloads, and work on hi res choices too. Again, endeavor to let me know why that stuff's cool. Don't assume I won't be interested. Don't expect big sales there right away. Cultivate. Who knows, maybe I'll stop trolling eBay or Amazon for used CDs and give you and the artist the money instead. Chafing at Apple pulling the strings? Gee.

Finally, create value in new "product" by devaluing older content the artist has long ago forgotten about, i.e. last year's music. Stop pricing old stuff as if it were new stuff. You'll move a ton of it, make some money, and be properly incentivized to create interest in new material.