Digital platforms now account for around 20 percent of recorded music sales, up from 15 percent in 2007. Despite this the music industry is still plagued by large amounts of unlicensed music distributed online. The IFPI estimates over 40 billion files were illegally shared in 2008, giving piracy a rate of about 95 percent.

Single track downloads were up 24 percent in 2008 to 1.4 billion worldwide, while digital albums were up 36 percent.

John Kennedy
IFPI

"The recorded music industry is reinventing itself and its business models," said John Kennedy, chairman and chief executive of IFPI.

"Music companies have changed their whole approach to doing business, reshaped their operations and responded to the dramatic transformation in the way music is distributed and consumed."

Advertising supported services that are free to users are also opening up. One of the highest-profile launches was MySpace Music in the U.S. in September 2008. Several major music companies have also signed licensing agreements with YouTube.

Music companies are also increasingly licensing music to third parties. One area of success is the games market, where music games were responsible for 15 percent of overall game sales in the U.S. in the first half of 2008 (NPD Group). Guitar Hero and its sequels have sold more than 23 million copies in three years, generating more than $1 billion in North America.

"There is a momentous debate going on about the environment on which our business, and all the people working in it, depends," said Kennedy.

"Governments are beginning to accept that, in the debate over "free content" and engaging ISPs in protecting intellectual property rights, doing nothing is not an option if there is to be a future for commercial digital content."

Worldwide music sales fell 8 percent to $19.4 billion in 2007. Sales of CDs dropped 13 percent to $15.9 billion. Sales of downloaded songs and mobile ringtones increased 34 percent to $2.9 billion.

Digital sales "are growing healthily but, crucially, not fast enough to arrest the overall decline of the market," John Kennedy, chairman and chief executive of the IFPI told the International Herald Tribune.

The report said that dealing with online piracy is key for the industry. "Even the most innovative business models are totally undermined by free music," Kennedy said. There were 30 billion pirated downloads in 2007, with 39 percent of U.S. teens using file sharing networks.

The U.S. music industry lost $5.3 billion to digital and physical piracy, the report said, referring to data from the Institute of Policy of Innovation.

The report said working with Internet service providers is a priority and indicated more than two-thirds of file sharers would stop illegally downloading music if they received a warning notice from their service providers.

In a new report from the IFPI “Digital Music Report 2007″ says that digital music sales account for 10 percent of the music market. In 2006 digital music sales revenue hit an estimated $2 billion while the number of songs available online reached four million.

“The record industry today has evolved into a digital thinking, digitally literate business,” said IFPI CEO John Kennedy. “We expect at least one quarter of all music sales worldwide to be digital.”

The report points out that while digital music sales have helped struggling record labels achieve a revenue stream it has not been enough to close the gap on declining CD sales. Digital piracy and the devaluation of music continue to be a challenge for the digital music business.

On the piracy issue Kennedy said,” With cooperation from ISPs we could make huge strides in tackling Internet piracy globally. It is very unfortunate that it seems to need pressure from governments or even action in the courts to achieve this, but as an industry we are determined to see this campaign through to the end.”

Consumers seem to be enjoying all the advantages that digital music has to offer. They are able to search online stores for rare songs or albums that may be out of print and would be difficult to obtain from a traditional offline store.

Kennedy said,” The chief winners in the rise of digital music are consumers. They have effectively been given access to 24-hour music stores with unlimited shelf space. They can consume music in new ways and formats – an iTunes download, a video on YouTube, a ringtone or a subscription library.”

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An investigation spurred by the International Federation of the Phonographic Industry (IFPI) led to the filing of charges against 3,500 people who uploaded music with eDonkey.

IFPI said some of the accused had provided as many as 8,000 songs for sharing purposes. The organization claims legal physical sales of music have dropped by a third in five years while 400 million music files were illegally downloaded in 2005.

It should be noted that IFPI did not mention the legal sales of digital music in Germany. According to the MacWorld UK website, iTunes and T-Online’s Musicload sold a combined 30 million songs online in 2005. That figure likely impacted the physical sales cited by IFPI.

Authorities in Germany searched 130 locations for evidence related to the file sharing investigation. “Most people clearly know that file-sharing without permission is illegal – unfortunately it takes legal actions such as this make a real impact on behavior,” said John Kennedy, chairman and CEO of IFPI.

Accused files sharers face five years in prison under German law. In previous cases, file sharers have paid penalties averaging 2,500 euros, or $3,195, for their file sharing.

A five-year sentence would greatly exceed what a German tribunal meted out in 2005 for another computer-related crime. Sven Jaschan, who created the Sasser worm that affected millions of PCs worldwide and caused multi-million dollar disruptions to businesses, skated with a sentence of probation and a skimpy community service requirement.

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In the first six months of 2005, the number of legal music downloads outnumbered the whole of 2004 downloads. The International Federation of Phonographic Industries (IFPI) said that 180 million single tracks have already hewn their way to the scores of iPods and PCs, compared to 157 million honorably acquired tracks for all of last year.

Industry-wide campaigns promising to prosecute file-sharers, education programs, and 13 percent rise in broadband access were credited for the positive turnaround. From January to July, illegal downloads increased by three percent, from 870 million to 900 million files.

That there was a spike of 180 million legal downloads compared to only 30 million pirated tracks convinces IFPI that the fight against file swapping is less Tyson versus Taco Bell Chihuahua and more Tyson versus a slightly bigger, meaner dog-like a Scottish Terrier.

“We are now seeing real evidence that people are increasingly put off by illegal file-sharing and turning to legal ways of enjoying music online,” said John Kennedy, the IFPI’s chairman.

“Whether it’s the fear of getting caught breaking the law, or the realization that many networks could damage your home PC, attitudes are changing, and that is good news for the whole music industry.”

Hundreds of lawsuits have been filed against music lovers who provide access to copyrighted songs by loading them into file sharing networks that could lead to millions acquiring the music for free.

Subscriptions to the 300+ digital music sites have also been on the rise, increasing from 1.5 million in 2004 to 2.2 million as January 2005.

But the fight is long from over, says Kennedy.
“We are not there yet. Many still appear to be gripped by a bad habit they are finding hard to break,” he said. “These people are now increasingly likely to face legal actions against them.”

Kennedy echoed Russian boxer, Ivan Drago, as he, still sweating from the bout, glared into the camera at any pirate who might be listening and said, “I will break you.”