IFPI Digital Music Report 2010
    Music how, when, where you want it
Contents
 3. Introduction

 4. Executive Summary: Music – Pathfinder In The Creative Industries’ Revolution

 8. The Diver...
Music How, When, Where
You Want It – But Not
Without Addressing Piracy
By John Kennedy, Chairman & Chief Executive, IFPI

...
Digital Music Report 2010




Executive Summary: Music – Pathfinder In The
Creative Industries’ Digital Revolution
“Our ai...
Executive Summary




Access and bundling                                                                           Barrie...
Digital Music Report 2010




Piracy hits investment                       Digital Music: Charting Change
The crippling ef...
Executive Summary




“There have to be sanctions, ISPs have to be involved and there
 needs to be back-up legislation. I ...
Digital Music Report 2010




The Diversification Of Business Models

“We are shaping our own future by finding new ways o...
The Diversification Of Business Models




                                                 signed-up to date. Unlimited s...
Lady Gaga                                                                                                                 ...
Taylor Swift




                                                                                              Beyoncé
In ...
Digital Music Report 2010




In Profile: Pioneers Of Digital Music

                                                     ...
In Profile: Pioneers Of Digital Music




Replacing Piracy
With Partnership
Jonathan Benassaya, CEO of Deezer

Deezer is a...
Digital Music Report 2010




                                                       Around 65-70 per cent of the music ac...
In Profile: Pioneers Of Digital Music




The Pioneer ISP
Tejs Bautrup, Music Manager,
TDC Play

TDC was the first ISP wor...
Digital Music Report 2010




                                                there’s a significant opportunity to
       ...
In Profile: Pioneers Of Digital Music




                                                           Brazil is the number ...
Digital Music Report 2010




Competing In A Rigged Market –
The Problem Of Illegal File Sharing
“We can no longer invest ...
Competing In A Rigged Market




                                                                                         ...
Digital Music Report 2010




‘Climate Change’ For All Creative Industries

“We are in danger of creating a world where no...
‘Climate Change’ For All Creative Industries




maybe by 70 per cent. The money is
not there anymore. And if there are no...
Digital Music Report 2010




                                  Oxford Economics estimates losses               create a l...
‘Climate Change’ For All Creative Industries




             Case Studies                                 Teemu Brunila
 ...
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
IFPI Digital Music Report 2010
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IFPI Digital Music Report 2010

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Music how, when, where you want it - In 2009 globally, for the first time, more than one quarter of record companies revenues came from digital channels.

It would be great to report these innovations have been rewarded by market growth, more investment in artists, more jobs. Sadly that is not the case.

Digital piracy remains a huge barrier to market growth. The slump in sales and investment in three major music markets outlined in the Report testify to this and are a warning to the rest of the world.

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Transcript of "IFPI Digital Music Report 2010"

  1. 1. IFPI Digital Music Report 2010 Music how, when, where you want it
  2. 2. Contents 3. Introduction 4. Executive Summary: Music – Pathfinder In The Creative Industries’ Revolution 8. The Diversification Of Business Models 10. Digital Music Sales Around The World 12. In Profile: Pioneers Of Digital Music 18. Competing In A Rigged Market – The Problem Of Illegal File-Sharing 20. ‘Climate Change’ For All Creative Industries 24. Graduated Response – A Proportionate, Preventative Solution 28. The World Of Legal Music Services 30. Consumer Education – Lessons Learned
  3. 3. Music How, When, Where You Want It – But Not Without Addressing Piracy By John Kennedy, Chairman & Chief Executive, IFPI This is the seventh IFPI Digital Music in new artists, we have to tackle mass legislation to curb illegal file-sharing. Report. If you compare it to the first piracy. Second, we are progressing towards Another clear change is within the music report published in 2004, you can an effective response. The progress is sector itself. It was, until recently, rare see a transformation in a business agonisingly slow for an industry which does for artists to engage in a public debate which has worked with the advance not have a lot of time to play with – but it is about piracy or admit it damages them. of technology, listened to the consumer progress nonetheless. In September 2009, the mood changed. and responded by licensing its music Lily Allen spoke out about the impact of in new formats and channels. On page 20 of the Report, Stephen illegal file-sharing on young artists’ careers. Garrett, head of the production company When she was attacked by an abusive In 2009 globally, for the first time, more Kudos, refers to a “climate change” in online mob, others came to her support. than one quarter of record companies’ the creative industries. That expression revenues came from digital channels. The mood of change is clearly reaching Fans can acquire tracks and albums governments. In 2009, legislation in ways inconceivable a few years “To continue to invest in requiring ISPs to tackle P2P piracy was ago – from download stores, streaming adopted in France, South Korea and sites, subscription services, free-to-user new artists, we have to tackle Taiwan. These countries established in sites, bundled with their broadband or a mass piracy.” law that it is appropriate for those who mobile phone handset. persistently violate copyright, despite repeated warnings, to face a proportionate It would be great to report these captures the way the debate over digital and effective sanction. This sets a innovations have been rewarded by piracy has evolved. You hear it around tremendous precedent in the protection market growth, more investment in artists, the world: this is no longer just a problem of intellectual property rights online. In more jobs. Sadly that is not the case. for music, it is a problem for the creative the UK, as in France, it is understood that Digital piracy remains a huge barrier to industries: affecting film, TV, books and government has a key role in protecting market growth. The slump in sales and games. In this arena, the music industry content on the internet. Even in the most investment in three major music markets is the pathfinder of the creative industries, competitive, innovative and market-driven outlined in the Report testify to this and pioneering with new offerings for the industries, the market itself can only are a warning to the rest of the world. consumer. In 2009, Rupert Murdoch operate under the effective rule of law. On the positive side, we have built a said that the content kleptomaniacs US$4.2 billion digital business full of should not triumph and Microsoft spoke This Report points the way to an optimistic consumer-friendly services. On the out against piracy, ready to ban players future for the music industry – great negative side, our global sales fell by from Xbox live if they had modified their offerings for consumers, more investment around 30 per cent from 2004 to 2009, consoles to play pirated discs – no three in artists, economic growth and more jobs. the growth of our digital sales is slowing strikes procedure needed! Yet we are nowhere near that future today, and even the success stories reported and we will not get there without a secure in this publication will struggle to survive The thinking behind the debate has legal environment where creative work is unless we address the fundamental also crucially changed. It is about the rewarded and copyright theft is effectively problem of piracy. future of a broad base of creative industries deterred. To unlock the enormous that have huge economic importance potential of digital music, we have to Some ask, ‘why not give up the fight?’ and employ vast numbers of people. address piracy both on P2P networks The answer is straightforward – first, we This is one of the reasons why the French, and in other forms. That is where, today, cannot afford to. To continue to invest UK and other governments are set on we look to governments for action. n 3
  4. 4. Digital Music Report 2010 Executive Summary: Music – Pathfinder In The Creative Industries’ Digital Revolution “Our aim is not simply to be digitally savvy – our aim is to be consumer savvy.” Elio Leoni-Sceti, Chief Executive, EMI Music A diversifying industry New business models The music business is continuing to “Our vision is music availability Record labels are making music lead the creative industries into the everywhere, at any time available in an unprecedented digital revolution. In 2009, for the first number of ways. A few years time ever, more than a quarter of the and in any place. But the ago, an album would have been recorded music industry’s global revenues biggest question is how do we delivered in just a few formats. (27%) came from digital channels – a monetise it in an environment Today, albums come in hundreds market worth an estimated US$4.2 billion of formats and products. in trade value, up 12 per cent on 2008 of widespread piracy?” For example, Beyoncé’s (IFPI). In the US, the world’s largest music Eric Daugan, Senior Vice I Am... Sasha Fierce album market, online and mobile revenues President, Commercial Strategy, is available in more than now account for around 40 per cent of 260 different products in music sales. Consumer choice has been Warner Music International EMEA the US including music transformed as companies have licensed videos, mastertones, more than 11 million tracks to around “Our aim is not simply to be digitally ringback tones and 400 legal music services worldwide. savvy – our aim is to be consumer savvy. audio tracks. We know that people want to consume Fans today can access and pay for music music digitally, so we need to be digitally Over the past couple of in diverse ways – from buying tracks aware, have digital capabilities and years, music companies or albums from download stores, and marketing ability,” says Elio Leoni-Sceti, have partnered with using subscription services, to using Chief Executive, EMI Music. ad-supported services music services that are bundled with such as Spotify, Deezer, devices, buying mobile apps for music, In the digital era, the music industry MySpace Music and and listening to music through streaming is diversifying its business models and We7, ISPs such as services for free. revenue streams. The à-la-carte download TDC in Denmark, Terra model, pioneered by iTunes, remains the in Brazil and Sky in the Music companies have licensed advertising largest revenue source in the online sector UK, mobile operators such –supported services to attract non-payers and has more than 100 million accounts as Vodafone, handset makers and file-sharers, struck groundbreaking across 23 countries (Apple). Recent such as Nokia and Sony Ericsson, deals with major ISPs, developed innovations in the à-la-carte sector include and online video channels such as partnerships with device manufacturers the introduction of variable pricing, which Hulu and VEVO. and established a new platform for has increased the conversion of track high-quality music videos aimed at mass purchases to album sales, as well as the audiences. All of these initiatives are launch of the iTunes LP and the rollout of experimental and innovative, and all are DRM-free downloads internationally. predicated on the simple principle of meeting the needs of the music fan. 4
  5. 5. Executive Summary Access and bundling Barriers to growth Despite this progress, the challenge is “We’re much closer to the utopia, The digital music business still faces to take digital music to the commercial where we’re extracting €1 out of many barriers to its growth. These include mass market and “monetise” existing a million consumers as opposed lack of marketing by services in some behaviour. There is huge untapped countries, problems with publishing rights, consumer demand and potential for to €10 out of a thousand.” consumer reluctance to make online growth. Research conducted by Rob Wells, Senior Vice payments and the complex challenge Capgemini found that 70 per President, Digital, Universal of creating services that are user-friendly cent of all music consumed to different consumer groups. in the US, UK, France and Music Group International Germany came through digital Transcending all these obstacles, channels, while revenues “Music access” is seen as a compelling however, is the problem of digital piracy. from digital platforms in those legitimate alternative to piracy. Music Numerous indicators, outlined on page countries accounted for only 35 is bundled with services and devices, 18 of the report, confirm digital piracy per cent of industry revenues. or offered at no cost to the consumer is choking revenues, new services and One way of realising this on an advertising-supported basis. investment. Surveys also confirm the growth potential is to generate This low “average revenue per user” simple proposition supported by focus value from the behaviour of and high volume approach is seen groups and anecdotes everywhere – the vast number of people as one of many hybrid revenue models that the majority of consumers who who currently do not pay for rather than a single model for the future. illegally download, rather than use the music they consume. many legitimate alternatives available Convergence of services across today, do so because of the lure of “free”. In the US, only 18 per cent devices is also a major theme in of internet users aged 13 digital music. This is helping break A variety of third-party research and over regularly buy digital down the interoperability barriers that conclusively indicates that the net music today (NPD Group). have limited the consumer appeal of effect of illegal file-sharing is reduced In Europe, digital some services and restricted the growth purchasing of music. This is despite the adoption is even of the digital business. Each year obvious fact, also borne out in research, less widespread – the consumer is getting a better deal that some file-sharers are often also only 8 per cent as it becomes easier to transfer and buyers of music. of internet users use music across multiple screens in the top five and platforms. In 2009 for example, EU markets mobile applications brought streaming “In order to take the business frequently buy services Spotify, Deezer and others to the next level and capture music digitally to devices like the iPhone, allowing a (Forrester). premium service offering portability. the enormous potential that’s This convergence of services and still untapped, we need new devices, opening up new revenue services to truly break through channels is expected to accelerate. to the mass market. To do that, an attractive user interface, a strong value proposition and a clear marketing message are essential, as is an effective way of curbing piracy.” Thomas Hesse, President, Global Digital Business, U.S. Sales & Corporate Strategy, Sony 5
  6. 6. Digital Music Report 2010 Piracy hits investment Digital Music: Charting Change The crippling effects of illegal file- sharing are clear. Overall music sales 2003 2009 fell by around 30 per cent between 2004 and 2009. The worst-affected Licensed music services Less than 50 400+ markets are countries where, despite Catalogue available 1 million 11m + tracks the industry’s efforts, legitimate digital services have had little chance to take Industry’s digital revenues US$20m US$4.2 billion root. In Spain where legal problems have frustrated the ability to take action % of industry’s revenues Negligible 27% against piracy, sales fell by around 17 from digital channels per cent in 2009 and the market is now about one third of its level in 2001. In Spain and elsewhere the victim has been investment in local acts. The number of local artist album sales fell by 65 per cent between 2004 and 2009. In France, the number of local repertoire album releases plummeted from 271 in the first half of 2003 to 107 in the same period of 2009. In Brazil, local full priced artist album releases by the five biggest music companies slumped 80 per cent between 2004 and 2008. Salvador Cufi, Chairman of indie label Musica Global, based in Girona, Spain, says “We have made a great effort to digitise our catalogues and to create new business models for the internet – but there is no way in today’s market that we can make those investments profitable. It is a very sad situation that we can no longer invest in new artists in the way we would like.” Eric Daugan, Senior Vice 260+: Number President, Commercial of different products Strategy, Warner Music International EMEA, says “Our vision is music Beyoncé’s I Am... available everywhere, at any time Research by Harris Interactive in the and in any place, but the biggest UK shows that although P2P remains Sasha Fierce was made question is how do we monetise it in the major piracy problem, the illegal available in during 2009 an environment of widespread piracy? distribution of music through other One way is to come up with products channels grew considerably in 2009. that people want to consume, and that is our responsibility. But if these Unlicensed download sites, news products and services are to flourish groups, specialised search engines, we also need help from governments forums, blogs and cyberlockers were and ISPs.” all significant channels for infringement. 6
  7. 7. Executive Summary “There have to be sanctions, ISPs have to be involved and there needs to be back-up legislation. I would have preferred a purely commercial solution to achieve this, but sadly it doesn’t look as if that is going to happen. That is why there needs to be the encouragement coming from legislation.” Martin Mills, Chairman, Beggars Group Case studies, creative industries education alone, while it has effectively There are indications, in Sweden raised awareness of the legal and and South Korea, of the positive ethical issues around unauthorised impact of a strengthened copyright downloading, does not change environment on curbing piracy and consumer behaviour. Good legitimate enhancing legitimate sales. music offerings and meaningful deterrence are vital in this process. Case studies in this report show improved music sales in those countries Legislation, ISP cooperation in 2009, though sustained action will be The music industry and other creative needed to maintain this progress. sectors around the world are seeking to engage ISPs in curbing digital piracy Digital piracy rose sharply on the on their networks. In most countries, agenda of all creative industries in this requires help from governments in 2009. With the rapid advance of establishing a consistent and effective technology, games manufacturers, response from the entire ISP community. film and television producers and The most widely considered approach book publishers are now facing the so far is a graduated response model, same challenges felt by the music involving escalating warnings to infringers industry at the start of the decade. culminating, as a last resort for those Simon Renshaw, artist manager, says who refuse to stop, in he sanction of “What I worry about is that we are temporary account suspension. The heading into a world where copyright graduated response is a proportionate, has no value and where there’s effective way to curb piracy. no incentive for anyone to provide patronage and support for the creators IFPI first called for ISPs to cooperate of intellectual property.” in a graduated response system in 2005. Five years later, voluntary Consumer education means have largely failed to progress. Consumer education has a vital role A number of governments however, to play, and the music industry is including France, UK, New Zealand, currently involved in more than 70 South Korea and Taiwan, have enacted awareness programmes across the legislation to require such cooperation world. It is clear however, that consumer or are in the process of doing so. n “A decade’s worth of music file-sharing and swiping has made clear that the people it hurts are the creators... and the people this reverse Robin Hooding benefits are rich service providers, whose swollen profits perfectly mirror the lost receipts of the music business.” Bono, singer-songwriter, in the New York Times, January 2010 7
  8. 8. Digital Music Report 2010 The Diversification Of Business Models “We are shaping our own future by finding new ways of getting music into people’s lives.” Lucian Grainge, Chairman and CEO, Universal Music Group International Downloads continue to grow consumer demand for A-la-carte download services account for content such as video the majority of online revenues and saw is increasing network steady growth. Three key developments costs. Music and other in 2009 were: the roll-out of more DRM- entertainment content free services, continued growth in digital help ISPs reduce ‘churn’ album offerings and the introduction of and retain customers as variable pricing. well as generating new revenues. Music companies have expanded their TDC’s PLAY service was the first licensing of DRM-free à-la-carte services ISP music service to internationally. Fans can now transfer launch. Today it offers their purchased music files to different TDC’s broadband, mobile portable players when they buy from and cable customers in virtually any online service. Digital album Denmark unlimited music sales grew faster than single track streaming from a catalogue purchases in many markets. Variable of 6.1 million tracks at no pricing, by which catalogue music is additional cost. TDC’s online customer Vodafone for example is active in more discounted relative to new top charting churn was reduced by 50 per cent, for than 20 countries, offering both à-la-carte tracks, helps increase the conversion of those who used TDC Play. and unlimited subscription services. In track purchases into album sales. April 2009 Vodafone Spain launched In the UK, home entertainment company an unlimited music subscription service The launch of iTunes LP – a deluxe digital Sky launched Sky Songs in October bundled with an overall mobile service format – boosted demand for premium 2009 offering consumers unlimited which attracted more than 100,000 users albums which account, on average, for 65- streaming of more than four million tracks shortly after launch. 70 per cent of the sales of a major digital with packages of 10-15 downloads per album release. Artists from Bob Dylan to month. This new offering is powered by Music subscriptions bundled Jay-Z are engaging fans in this new way. music service Omnifone. with devices Premium album downloads often outsell Mobile handset manufacturers Nokia regular versions. During the first week of In Brazil, Terra Networks, part of and SonyEricsson started offering sales through iTunes in Europe, the deluxe the Telefonica Group, launched Sonora unlimited music services bundled with version of Michael Bublé’s Crazy Love out- in 2006. The service offers unlimited mobile phones in 2008. The global sold the standard version by a ratio of 3:1. music streaming through a “tethered” reach of these players brings enormous subscription service with a fee bundled opportunities. Nokia is the biggest ISP and mobile partnerships into the ISP bill. In February 2009 Sonora mobile device manufacturer in the Internet service providers (ISPs) launched a new service tier – 20 hours world selling more than 450 million are increasingly looking to become of music streams per month, free-to- phones every year. commercial partners of music consumer on an ad-supported basis. companies. They can add value to The new offer attracted more than three Nokia’s Comes With Music (CWM) the ISPs’ offers at a time when their million users in less than one year. Mobile expanded widely into international markets traditional broadband market is close operators also increasingly offer added- in 2009, launching in 11 countries. to saturation in many markets and value content. The service has enjoyed particular 8
  9. 9. The Diversification Of Business Models signed-up to date. Unlimited streaming deal with YouTube in September 2009 “The key for all of us in the is free on a computer and is advertising- that created a feature-rich experience industry is to continue to supported. Portable access through a for fans accessing music related-content mobile application with no advertising from Warner Music artists, including a experiment, to be somewhat is available for €9.99 a month. Spotify high-quality premium player, enhanced agnostic in our approach.” has reached an agreement with Swedish channels and links to artist websites. Ron Werre, President, EMI ISP TeliaSonera, allowing its customers The agreement also allowed the record to pay for the premium service on their company to sell advertising alongside Music Services broadband bill. videos that use its music across multiple channels. Another service operating a similar model is Deezer, a web-based Thomas Hesse, president, Global Digital service which users can access on Business, US Sales and Corporate any computer without the need to Strategy, Sony Music Entertainment, download software. It offers music says “VEVO was created to improve streaming and personalised web the experience for both customers radios and has attracted more than and advertisers with a new premium 16 million users to date, including environment dedicated to viewing 10 million in France. Advertising- professionally produced content.” supported models have shown some success in migrating users unwilling Hulu is another service offering to pay for music and who have mainly music videos and live concerts used illegal file-sharing services. online. MySpace Music has also According to GfK, six out of 12 extended its service to launch Swedish users of Spotify reported MySpace Music Videos. in July they had stopped or cut down on their file-sharing activity Direct to consumer since using the service. Labels also work to support artists in success in Latin America. In Mexico, direct-to-consumer sales of music, there were 10 million downloads in the iTunes announced in late 2009 that merchandising and concert tickets. first six months of the service’s operation it was purchasing Lala, in a move Warner Music started to take artist and Brazil is now CWM’s top-selling that industry commentators said could websites in-house in 2008 and now territory. “Comes with Music is a strategic lead to the company becoming involved operates them for around a quarter move to transform the company from a in the streaming market. of its European roster. In Spain, the handset manufacturer into an internet company runs artist Alejandro Sanz’s services company. Music is obviously an Monetising music videos online official site, signing up around 80 important pillar out of all the services that Music video is a leading growth area per cent of his fan club to premium we’re launching”, says Adrian Harley, in digital music, driven by the success membership for €38.99 a year. Nokia Music Manager, Brazil of streaming services. According to a The site’s monthly unique user and Southern Cone. study by Jupiter Research in 2009, sites numbers soared by 300 per cent such as YouTube dominate digital music since Warner began to work with Other types of device partnerships activity in Europe with nearly one-third of Sanz on it, with the artist blogging include Dell’s bundling of the all internet users (31%) watching music four or five times a day to help generate subscription service Rhapsody with its videos online. an active online community. n computers in the US and with Napster in the UK for a limited period. In December 2009, Universal Music Group and Sony Music Entertainment The rise of streaming services 1/3: Nearly a third partnered with YouTube and the Abu A key development in 2009 was Dhabi Media Company to launch VEVO the growth of advertising-supported in the US and Canada. The service has services that offer music streaming at also signed an agreement with EMI of European internet no cost to fans. The “upselling” of users Music. The service is focused on the users watch music to premium services is critical to the ad-supported distribution of professional long-term success of these companies. music videos online through the VEVO videos online Spotify is one of the highest-profile channel within YouTube, through VEVO. of such services. More than seven com and other online destinations. In a million users across six countries have separate move, Warner Music signed a 9
  10. 10. Lady Gaga Jason Mraz Black Eyed Peas Digital Music Sales Around The World Music companies’ global digital revenues Top 10 Digital Songs 2009 grew by an estimated 12 per cent in 2009 totalling US$ 4.2 billion in trade ARTIST TITLE SALES revenues. Digital channels now account Lady Gaga Poker Face 9.8m for 27 per cent of music sales, up from Black Eyed Peas Boom Boom Pow 8.5m 21 per cent in 2008 (IFPI). The music Jason Mraz I’m Yours 8.1m sector is generating far greater value from Lady Gaga Just Dance 7.7m the online and mobile market than any Black Eyed Peas I Gotta Feeling 7.1m other sector in the creative industries, Taylor Swift Love Story 6.5m with the exception of electronic games. Music companies’ revenues from digital Beyoncé Single Ladies (Put A Ring On It) 6.1m channels are now proportionately more Soulja Boy Tell’Em Kiss Me Thru The Phone 5.7m than double that of the film, newspaper Kanye West Heartless 5.5m and magazine industries combined. Britney Spears Circus 5.5m Source: IFPI. Chart includes online single tracks, audio and video mastertones, ringback tones and full track downloads Despite this success, the increase in to mobile. Period of 12 months to November 2009. Sales are rounded. Combines all versions of the same song. the music industry’s digital sales is not offsetting the sharp decline in sales of Global Digital Revenues Share physical formats. Overall, global music 35 sales fell for the tenth year running in 2009. Full year figures were not available at the time of going to press, 30 but digital and physical global sales in the first half of 2009 were down 25 12 per cent, excluding performance rights income (IFPI). 20 In the largest digital music market, 32% 15 the US, within the space of eight 27% years digital revenues have gone from 10 practically zero to accounting for around 40 per cent of the US music market 5 (RIAA). iTunes is now the biggest music 5% 4% retailer in the US, accounting for 25 2% per cent of the overall music market, 0 Games Recorded music Films Newspapers Magazines followed by Walmart, Best Buy and Amazon (NPD Music Watch). Sources: IFPI, PWC Global Entertainment and Media Outlook 10
  11. 11. Taylor Swift Beyoncé In Asia, around a quarter of the music A study by Jupiter Research in March Globally, single tracks crossed the business is now composed of digital 2009 highlighted some reasons for 1.5 billion mark for the first time, revenues, set against a backdrop of Europe’s digital lag: up an estimated 10 per cent on 2008. sharply falling physical sales (IFPI). Digital albums grew an estimated Digital sales in China, Indonesia, n The impact of music piracy – there 20 per cent, double the rate of single South Korea and Thailand now are 29.8 million frequent users of tracks. Today, around 20 per cent account for more than half of all file-sharing services in the top five of albums sold in the US are digital music sales. South Korea has seen EU markets alone and other forms of and around 15 per cent in the UK the benefits of a stronger copyright piracy are growing. Trends indicate a (RIAA, BPI). environment and there has been north-south divide, with Italy and Spain strong growth in MP3 subscription showing considerably higher piracy The best selling single track of 2009 services (see page 26). Japan, the levels. Paid digital music services have a was Lady Gaga’s Poker Face, selling a biggest market in the region, was fundamental problem in competing with total of 9.8 million units. By comparison, hit by mobile piracy and economic widespread illegal downloading. the best-selling digital single track downturn, seeing CD sales fall by in 2008, Lil Wayne’s Lollipop, sold more than 20 per cent in the first n Europe’s higher taxation levels compared 9.1 million units and in 2007 Avril half of 2009, while digital sales to the US, different royalty structures and Lavigne’s Girlfriend sold 7.3 million were flat. a fragmented rights landscape makes units (IFPI). pan-European licensing a resource- Strong downloading demand helped intensive and complicated process. Global mobile music revenues fell in Australia become one of the few 2009, hit by piracy, lack of operator developed music markets to achieve the n High-street retail consolidation started support for music services in some “holy grail” of overall growth in the first earlier in the US. This drove active markets and saturation of the half of 2009, as the rise in digital music music fans online earlier, both to mastertones sector. On the other sales offset a small decline in revenues online CD retailers such as Amazon hand, single track mobile downloads from physical formats. Digital album as well as digital stores. were stable and ringback tones sales nearly doubled in the first half of continued to grow thanks to strong 2009, representing almost 8 per cent of n The $0.99 à-la-carte model has been sales in the US, Japan and India. overall album sales, and digital albums better suited to the US compared to the are proving especially popular in the fragmented European market given the Music subscriptions continued, and early days after a title’s release (ARIA). comparatively low margins, which favour are expected to grow, account for Some local artist releases, for example large players and economies of scale. more than 5 per cent of digital sales those by Australian artists Eskimo Joe, in 2009 (IFPI). Services such as Hilltop Hoods and Paul Dempsey, saw Latin America closely follows Europe TDC PLAY, Nokia Comes With Music, digital album sales of between 15 and in terms of digital share, with nearly Spotify Premium and Vodafone drove 20 per cent of total first week sales. 15 per cent of revenues coming from this growth. Despite still accounting digital channels. Brazil is the biggest for a modest share of overall digital Europe continues to lag behind in digital market in the region and saw revenues, advertising-supported digital adoption, with only around the successful development of services revenues are also expected to 15 per cent of sales coming from including Nokia Comes With Music and show strong growth in 2009. n digital channels. In 2009 however, Terra Sonora in 2009. Mexico saw the Europe was the fastest growing region introduction of the iTunes store in August in terms of digital sales. 2009 – the first in the region. 11
  12. 12. Digital Music Report 2010 In Profile: Pioneers Of Digital Music People thought after six months that they had Music To The Household nothing to show for the money they had spent. Neil Martin, Business Development And who are we to determine how people should Director, Sky Songs enjoy music? If people want to buy music in bursts, we want their business.” The UK home entertainment company Sky’s music service, launched in partnership with all major and Sky has invested heavily in editorial support for the many independent record companies in October site. “You can’t just dump people in front of 150 years’ 2009, is the most high-profile tie-up to date worth of repertoire and leave them to get on with it. between the music industry and an ISP. You need to help people explore and discover new music otherwise they will be hit by choice paralysis.” “Sky is synonymous with premium content and great hi-tech driven solutions. We’re also known “We understand this through our work in television, for our pioneering work in launching and growing where schedulers provide choice that ensures people subscription services where people are happy watch more than two or three of the 600 channels to pay for content. We therefore had skills in available on the Sky platform. With Sky Songs, the company that were relevant to launching a editorial can lead people to digital music service” says Neil Martin, business explore certain genres or tracks. development director. The other day, the most visited page on the service was a playlist Sky Songs is part of the company’s broader move of the greatest-ever funeral to multi-platform delivery, which includes the songs, something that was driven launch of Sky Player on Xbox and mobile TV on the by a piece of editorial.” iPhone. “The way people use media is changing. A mainstream audience is now comfortable with Sky believes the increased enjoying content on different media – their phone, adoption of digital services will their PC and their TV.” be driven by the quality of the user experience offered. “When The service offers music fans unlimited streaming of we sold Sky Plus (a personal more than four million tracks and the opportunity to video recorder service), we didn’t download an album or 10 individual tracks for £6.49 sell the technology, we sold what per month or 15 tracks for £7.99 per month. Users it enabled you to do. Now it is in have the option of signing up for one month only. 25 per cent of UK homes. You “Subscription don’t sell bits and bytes, you services that sell the user experience. People locked people enthused about Sky Plus to into long their friends at parties or contracts without down the pub. We want to the option of generate such advocacy for downloading Sky Songs because of the were not popular. quality of the service.” n 12
  13. 13. In Profile: Pioneers Of Digital Music Replacing Piracy With Partnership Jonathan Benassaya, CEO of Deezer Deezer is a France-based ad-supported music streaming service. It has made the migration from being unlicensed and illegal to being a valued partner to the music industry. “In the US, start-ups usually begin in a garage; in Paris my partner started out in the music business in my kitchen – launching a website called blogmusik.net” says Jonathan Benassaya. “He soon received letters from bodies representing rights holders saying the service was illegal and must be shut down. He did that and then I sat down with him and the rights holders to see if we could work out a way forward.” The result was Deezer, a licensed and legal website that users can access anywhere using a browser. The service offers on demand music streaming, web radio and a smart radio tool similar to Last.fm or Pandora. Once users have listened to their own playlist a number of times they tend to switch to web radio to find out about new hits or the smart radio tool to discover new tracks. Deezer also offers a free mobile application for its web radio service. For the on- demand portable feature users pay €9.99 per month. The company has gone from three people in August 2007 to 45 people to date. “Our focus is on profitability instead of international expansion. That’s why we’ve done a huge job in France trying to optimise everything - from the music rights to the cost structure. We’ve grown from 100,000 unique visitors to 16 million across Europe, including almost 12 million in France.” n 13
  14. 14. Digital Music Report 2010 Around 65-70 per cent of the music accessed on Spotify is back catalogue rather than new releases, with the service functioning highly effectively as a music discovery tool. “Ultimately, it’s because the platform is so quick and it’s so easy to listen to whatever music you want within three seconds.” Spotify’s primary objective is to migrate illegal file-sharers to its service, shifting 15-25 year old music fans to a legal model that puts money back into the creation of new music. The service is also attracting music fans over the age of 30 and this demographic has a much higher conversion rate from Spotify’s free service to its premium offering. Spot & Identify Daniel Ek, CEO of Spotify “If you take one per cent of all the radio advertising and display advertising Spotify today offers registered users free access revenue and put it into the digital music to more than 6.5 million tracks to stream, while market then you have the equivalent of premium services enable fans that pay a monthly 16-20 per cent of the UK digital music fee to listen to music on their mobile handsets market. So it’s not impossible to build and to strip away the advertising that supports an advertising-supported service that the free model. delivers revenues for the music industry, but ultimately it’s the mix between this “In 2006 when we started working on the project, model and paid models that will help the company was just me and a colleague. grow overall revenue.” We quickly hired another four guys. When we launched in October 2008 we had around 40 Spotify is planning international people on the staff. Right now, there are about expansion. The company is partnering 110 people working for the company.” with tom.com, the biggest internet portal in China, which also has established “When I launched Spotify, I felt there was an partnerships with handset manufacturers inconsistency between how people consumed and telecoms. “Chinese people are very music and the way the business model worked. used to paying for mobile We are now using technology to bridge a business content. That’s something problem and make it more accessible for that’s been proved over consumers to get music. At the same time, and over.” the protection of the content is important so that the revenues derived flow back to the artists.” In the US, Spotify’s goal is to increase the Ek believes that the digital music business in number of subscribers Europe can grow at least fourfold in the next to a music service few years. “We’ve been focusing on the user by a factor of five. experience. Our aim has been to do something “This is obviously a huge that consumers love and then figure out how to task and might take a couple years to reach.” n monetise it.” 14
  15. 15. In Profile: Pioneers Of Digital Music The Pioneer ISP Tejs Bautrup, Music Manager, TDC Play TDC was the first ISP worldwide to offer a free- to-user music access service. Customers can The company has seen competitors enter the access the service through their computer at market in Denmark, but these all offer standalone home or their mobile phone if they are on the subscriptions for around US$14 per month, while TDC network. the TDC service is free to customers and also offers unlimited streaming. “We think that the launch By November 2009, the company reported that of TDC PLAY has had some impact on piracy in more than 140 million downloads had been Denmark. A third-party survey last year suggested made using the service, the equivalent of 2.5 that 40 per cent of PLAY customers said they have downloads a second since launch. The hundred stopped engaging in music piracy.” most popular artists accounted for 35 per cent of all downloaded tracks and 50 per cent of the “We were the pioneers in offering this type of tracks available had been downloaded in the first service for consumers and we are proud of that. year of launch. We have had people from around the world asking about how it can be imitated. This is a genuinely “The Danish market has a high rate of customer new way of looking at the online music market.” n churn in the broadband market. TDC PLAY has allowed us to reduce our churn among our broadband customers.” 15 33
  16. 16. Digital Music Report 2010 there’s a significant opportunity to build a large and global audience, perhaps the largest audience around music there’s ever been.” Music videos and related content are embedded in YouTube, but will also be available on VEVO’s own website and through many other platforms. There is a huge potential audience. Some 450 million people a month worldwide visit YouTube and more than 60 per A New Take On cent of them consume some form of music programming. The site became Music Videos the largest music video network on the Rio Caraeff, CEO Of Vevo web when it launched in December and will roll-out to key territories VEVO is a new concept created worldwide this year. in partnership between Google’s YouTube, Universal Music and “Music videos are largely the same Sony Music. The organisation has as they have been for the last 30 also signed a multi-year licence with years. They don’t reflect the transition EMI Music. With three of the four from being primarily consumed major record labels on board and on television, a linear medium, to partnerships with independent music the internet, which is a two-way companies including The Orchard communication platform.” and INgrooves, VEVO offers 85 per cent of the music videos available The company is focused on on the market and is looking to sign advertising and integrated brand future deals with additional music sponsorship. Caraeff brushes off companies. It aims to create a better fears that such revenue may not be music video experience for fans and available in tight economic times. a more attractive online environment “Online video advertising grew by 300 for advertisers. per cent last year, with brands looking for more premium content than is “The idea behind VEVO is for music currently available.” companies to be more responsible for their destiny. We’re not trying to “We will be producing new original protect old business models, we’re programming and we will be licensing only focused on what’s best for the in content that’s never been made music lover. If we can do that then available before. Music video will form we will be interesting to artists, labels the foundation of what is VEVO but it and advertisers. Doing things the old won’t end at music videos, it will just way is clearly not working. We think grow from there.” n 16
  17. 17. In Profile: Pioneers Of Digital Music Brazil is the number one market for Nokia Comes From Handset With Music. By the end of the third quarter of Makers To 2009, Comes With Music had claimed around 10 per cent of the digital music market in Brazil. Music Providers This success is partly put down to the fact that Tero Ojanpero, Executive VP the phones are not sold there without premium Of Services, Nokia CWM music service. Availability of licensed local repertoire is also important - Nokia secured a Nokia Comes With Music (CWM) was catalogue of six million tracks including 200 one of the most high-profile launches Brazilian independents and more than 2,000 of 2008 and 2009 saw it roll out to international independent labels. 13 countries around the world. Ojanpero says: “Each market is unique and “We are optimistic about the digital music business you need to align different things: the service and how it can expand. We want to make music needs to be great, you need a great mobile discovery as simple as possible and remove device, a good approach to the market and obstacles” says Tero Ojanpero. “CWM is a service channel support from the retailers and operators. that’s part of your handset – you get unlimited Only by aligning all of those things can you can downloads and you keep them forever. That’s the get a scalable model.” n special selling point, and there is no other service with these terms available in the marketplace.” Top100.cn is A Legitimate Foothold licensed by the majors In China and 10,000 Gary Chen, CEO Of Top100.cn independent labels to make China’s digital music landscape remains dominated four million by mass-scale copyright infringer Baidu and other tracks available. “deep link” infringing distributors. However, a very The company small legitimate sector is battling to gain a foothold. currently Top100.cn is the streaming and downloading service facilitates five behind the Google music search in China, launched million music in March 2009. The company aims its service at streams and downloads daily. the 217 million online users in China that stream or download music illegally. “We are the first licensed “It is a labour intensive task to add extra tracks service to really exploit this user base and take on the to the service. We have 60 full-time and 30 part- pirate services.” time staff working on this. We have to wait for clearance to use tracks and only distribute them Gary Chen thinks he can take on pirate when they are officially released. Pirate services services by offering a better user experience. do not operate under those restrictions.” “We provide access to music for free in just two clicks, compared with the three clicks it takes on The service places cost-per-click advertising and unlicensed sites. We offer 100,000 Chinese tracks targets international brands that want to reach alone, representing virtually all the local repertoire younger consumers in China, now the world’s ever digitised and licensed.” second largest advertising market. n 17
  18. 18. Digital Music Report 2010 Competing In A Rigged Market – The Problem Of Illegal File Sharing “We can no longer invest in new artists in the way we would like.” Salvador Cufi, Chairman of indie label Musica Global Piracy – The impact on sales relationship between file-sharing and sales increased their file-sharing activity Music companies and legitimate music of sound recordings.” Research from in 2008 did so “because it’s free”. services are trying to build their online Harris Interactive in 2009 among 3,400 In Norway, research by Norstat in 2009 business in a rigged market deluged by online consumers aged 16-54 in the also found the most cited reason for unauthorised free content. The growth UK highlighted that nearly one in four illegal downloading from P2P of illegal file-sharing has been a major P2P file-sharers (24%) typically spend services was “because it’s free”. factor in the decline in legitimate music nothing on music, while also finding an Further studies came to broadly sales over the last decade, with global overlap of legal and illegal downloading the same conclusion in Japan industry revenues down around 30 per among some file-sharers. and Belgium in 2009 (IFPI). cent from 2004 to 2009. In virtually every country of the world, spending on A Jupiter Research study in five recorded music has fallen since illegal European countries among 5,000 file-sharing became widespread. internet users aged 15 and over in 2009 found that, although there is an overlap All but a few of the independent surveys between the habits of online music confirm that the net impact of illegal buyers and file-sharers, most illegal file- file-sharing is to reduce spending on sharers “do not buy music and are nearly legitimate music. Most academic studies half as likely as music buyers to buy CDs exploring the dramatic fall in sales in a high street shop or from an online of recorded music conclude that the store.” The study also finds that the net damage caused by illegal file-sharing effect of illegal file-sharing is negative. is a major factor in the decline. “Although it is possible that file-sharing functions as some sort of discovery tool These include Norbert Michael (The for those digital music buyers that also Impact of Digital File-Sharing on the file-share, it is reasonable to assume that Music Industry: An Empirical Analysis, their spend would be higher if they were 2006), Rob & Waldfogel (Piracy on the not file-sharing. The overall impact of file High C’s, 2006) and Alejandro Zenter sharing on music spending is negative.” (Measuring the Effect of File Sharing on Music Purchases, 2003). The lure of free A separate body of research helps A 2006 study by Professor Stan Liebowitz, explain why illegal file-sharing is having File-Sharing: Creative Destruction this impact on consumer behaviour, or Just Plain Destruction? concludes: confirming the main driver of piracy to “The papers that have examined the be not better choice or quality, but the impact of file-sharing can be categorised “lure of free”. Researchers GFK found by result and by methodology. By results that “because it’s free” was the main the classification is quite simple. There is answer given among over 400 illegal file- one study (Oberholzer and Strumpf, 2004) sharers in research unveiled in Sweden that claims to find a zero impact but it in July 2009. A study by Entertainment has been frequently discredited. All the Media Research in the UK found that other studies find some degree of negative 71 per cent of those who admitted they 18
  19. 19. Competing In A Rigged Market The Spanish legitimate music It is the “free-to-user” appeal of illegal market is now only one third 1 IN 4: file-sharing that creates its unfair of its size in 2001 and fell by advantage over legitimate music around 17 per cent in 2009 alone. services, whose cost base, including Local artist album sales in the payments to artists and copyright P2P file-sharers Top 50 declined by 65 per cent holders, cannot compete with the free typically spend between 2004 and 2009. illegal alternative. This, more than any other factor, explains why the growth nothing on music n In Brazil, music sales fell by more of an innovative and entrepreneurial than 40 per cent between 2005 and legitimate music sector is being stunted 2009, with a disastrous impact in the absence of an effective response on investment in local repertoire. to digital piracy. In 2008 there were only 67 full Live performance earnings are priced local artist album releases The impact on local talent generally more to the benefit of by the five biggest music companies Illegal file-sharing has also had a very veteran, established acts, while in Brazil – just one tenth of the significant, and sometimes disastrous, it is the younger developing acts, number (625) a decade earlier. impact on investment in artists and local without lucrative live careers, who This has been particularly repertoire. With their revenues eroded by do not have the chance to develop damaging in a market where piracy, music companies have their reputation through recorded 70 per cent of music consumed far less to plough back into music sales. is domestic repertoire. local artist development. Much has been made of the idea that Clear evidence of this impact can New forms of piracy emerge growing live music revenues be seen in markets including France, Although P2P file-sharing remains the can compensate for the fall-off Spain and Brazil. most damaging form of piracy due to in recorded music sales, but the volume of files shared by users, this is, in reality, a myth. n In France, there has been a striking the last two years have seen a sharp fall in the number of local repertoire rise in non-P2P piracy, such as albums released in recent years. downloading from hosting sites, In the first half of 2009, 107 French- mobile piracy, stream ripping, instant repertoire albums were released, message sharing and downloading 60 per cent down on the 271 from forums and blogs. in the same period of 2003. French artist signings have also According to a study by Jupiter slumped by 60 per cent, from Research in 2009, about one in 91 in the first half of 2002 to 35 five people across Europe’s top in the same period of 2009. markets (21%) are engaged in Overall investment in marketing frequent unauthorised music-sharing. and promotion by the French music P2P piracy is still the biggest single industry fell nine per cent in the first source of this, with around two-thirds six months of 2009. It is estimated of music sharers file-swapping on that 25 per cent of the French internet P2P networks despite the increase population currently download music in non-network file-sharing. illegally from P2P networks or other sources on a monthly basis (Jupiter Research by Harris Interactive in Research, 2009). the UK shows that, although P2P piracy is the single biggest problem n In Spain, a culture of state-tolerated and did not diminish in 2009, the apathy towards illegal file-sharing illegal distribution of infringing music has contributed to a dramatic slump through non-P2P channels is growing in the music market. Spain has the considerably. The research showed the worst online piracy problem of any biggest increases in usage for overseas major market in Europe. Today, P2P unlicensed MP3 pay sites (47%) and usage in Spain, at 32 per cent of newsgroups (42%). Other significant internet users, is more than double rises included MP3 search engines * Bythe five the European rate of 15 per cent (28%) and forum, blog and board biggest music (Jupiter Research, 2009). links to cyberlockers (18%). n companies 19
  20. 20. Digital Music Report 2010 ‘Climate Change’ For All Creative Industries “We are in danger of creating a world where nothing appears to have any value at all, and the things that we make...will become scarce or disappearing commodities.” Stephen Garrett, Chief Executive, Kudos Piracy’s impact on the business and you’re going to start creative sector seeing piracy of novels and reference For years digital piracy has been a books.” Renshaw passionately believes problem most associated with music. that the stakes involved go far wider The cost of digital Today, however, creative industries than the music industry. “What I worry piracy for creative including movie, publishing and television, regard “monetising” the about is that we are heading into a world where copyright has no value and industries online world and addressing digital where there’s no incentive for anyone to n Major film release Wolverine piracy as their greatest challenges. provide patronage and support for the was illegally downloaded creators of intellectual property.” 100,000 times in 24 hours “The music industry was hit first, but now with increased broadband you He says the world has transformed, n Six out of 10 music file- have a situation where all the creative for both young and established artists sharers in the UK also illegally industries are at a tipping point” says and the economy of jobs and activity that download films Simon Renshaw, Los Angeles-based surround them. “We’re dealing with this manager of a long list of major artists every week – everything that you can afford n Illegal distribution of TV including the Dixie Chicks. “You can see to do around a record is greatly reduced content is growing faster than it in the collapsing DVD market; you can and that also means that everything that music and movie piracy see what’s going on in TV, newspapers you’re spending with video companies, and magazines. And now we’re seeing with hotels, with airlines, with graphic the same thing in the book publishing artists, make up - everything’s reduced, 20
  21. 21. ‘Climate Change’ For All Creative Industries maybe by 70 per cent. The money is not there anymore. And if there are no “We have to find a way of funding our future and not pretend rock stars the whole industry and the that new revenue models are magically going to rescue us as people working in it suffer.” the world of recorded music is destroyed by piracy .” Movie and TV piracy grows Björn Ulvaeus, singer-songwriter, formerly of ABBA The movie industry is also seeing the impact of digital piracy. The MPA, representing movie studios, estimates downloading of his company’s shows, that illegal streaming and such as the acclaimed series Spooks, film downloads now account for is threatening the future of TV and film 40 per cent of its piracy problem companies. He calls this a moment of by volume. Case studies around “climate change of the entertainment blockbuster movies show how top films industries” across the creative sector. now suffer from the same digital piracy “We are nurturing a generation who problems as popular albums. Pre-release are growing up to believe not only that copies of Wolverine everything is free were downloaded but that everything 100,000 times in should be free. 24 hours after a leak in April 2009. In US$1.4 And the problem with that is what 2008, seven million copies of Batman: TRILLION: we do - making music, television Dark Knight were The value of the programmes and downloaded on films - is incredibly BitTorrent. This has entertainment and expensive. We a ripple effect across media industry are in danger of the industry, on creating a world investment in 2009 (PWC) where nothing and jobs. In the US appears to have alone, the film any value at all, and television and the things that industries are estimated to employ 2.5 we make, which do have real value, million people, according to MPA. will become scarce or disappearing commodities. And that’s also threatening The problem is highlighted by Judy hundreds of thousands of jobs – Craymer, producer of both stage and not the fabulously wealthy or film versions of Mamma Mia, the UK the fat cats – these are drivers, film industry’s biggest ever box office electricians, carpenters, success. “It is clear that the technology ordinary working people. that has so badly damaged the music The combination of piracy business is now fast catching up with and recession is a pretty potent movies and TV – and it’s a frightening job killer.” prospect. Creative film making needs the revenues that come from sales of Garrett sees the solution as a works – but these are now being eroded combination of “monetisation” and as they are downloaded rampantly legislation engaging ISPs in curbing across the world. There is virtually piracy. “The music industry blazed an no perception of risk in this activity, impressive trail and is probably ahead even if most people know, as they of all the creative industries in terms of do, that stealing other people’s work finding ways of monetising the products is illegal and wrong.” of their labours. That said, it clearly has an enormous piracy problem. So we The television industry also raised have to do our best to plug the gaps the alarm over digital piracy in 2009. and curtail illegal activity.” The impact Stephen Garrett, executive chairman of of film piracy is being felt worldwide. television company Kudos, says mass In the UK alone, a 2009 report by 21
  22. 22. Digital Music Report 2010 Oxford Economics estimates losses create a legitimate digital publishing to film piracy at £600 million and sector. “Developing online services predicted that tackling the problem requires investment in new business would create nearly 8,000 jobs and models and one of the major threats of more than £150 million in tax revenues. piracy is that it takes away the chance Television programme piracy is also of being fairly rewarded for the financial proliferating. Commercial television risk of backing new ventures.” producers and networks need to recoup their substantial investment through George Walkley, head of digital for advertising revenue, international the Hachette UK Group, a division of syndication and DVD sales. Falling Hachette Livre, the French-based global Simon Renshaw advertising revenues combined with publishing group, says: “Digital piracy is digital piracy are threatening their ability a growing problem for publishing, and to do so. When Fox aired the premiere one which Hachette takes very seriously. of the last season of Prison Break in the It affects our authors, across the range “Unless we engage the ISPs US in April 2009, the illegal downloads of our businesses and subject areas. in assisting in the protection of the show at 1.14 million were virtually We realise that there are different ways of rights, then the value on a par with the number of legitimate to address the problem, but what is key viewers in the 18-49 age bracket. is that the creative industries cooperate of copyright is going to to lobby government and other completely disappear.” Book piracy threat stakeholders for effective measures Simon Renshaw, LA-based Book publishers are also grappling with to reduce illegal file-sharing.” the challenge of developing new business artist manager models for the digital era. Academic book Calls for ISP action piracy has been a problem for publishers Creative industries are looking to ISPs for some years. Now it is also seen as to address this problem. Renshaw says: major threat to the much larger consumer “They are like the utility companies of book sector. In 2009 the ebook, led by the 21st century – colossal industries Amazon’s Kindle, was rolled out for the first which have the right and the ability time around the world. Digital revenues to provide all this content. But unless from ebook sales still account for less than we engage the ISPs in assisting in the 1 per cent of the publishing sector, largely protection of rights, then the value of driven by the US, but are rising sharply. copyright is going to disappear.” Publishers say the market for digital books may develop far more slowly than for digital Judy Craymer applauds the UK music, but they agree that the breakdown government proposals for anti-piracy of technological barriers to distribution sanctions. “If our producers, directors, and the relatively small size of the files actors and crews are to maintain the Judy Craymer make book piracy a far greater threat success we have achieved through than before. movies like Mamma Mia, we are going to need to see concrete action to deal with Simon Juden, chief executive of the the problem. And we do not have the Publishers Association, notes that luxury of time.” piracy is already a real and present danger to the sales of high profile titles. For Kudos, Stephen Garrett says the “The biggest release of last year was French HADOPI law introducing a Dan Brown’s The Lost Symbol and graduated response has set an example the pirated version was out there internationally. “The French law is on the internet very, very quickly. absolutely right. It’s all very well to talk We were able to get illegal copies about consumer rights and people’s taken down, but it is tremendously rights to the internet, but equally we, the Stephen Garrett damaging because it was the most content owners and creators, have the valuable property for the publishing right to be rewarded for our work. I think business in 2009.” that squeezing someone’s bandwidth and ultimately cutting off that tiny percentage Juden notes that such piracy who persist seems to be quite a fair undermines the investment needed to balance between competing rights.” n 22
  23. 23. ‘Climate Change’ For All Creative Industries Case Studies Teemu Brunila one of the country’s leading pop-rock bands. The Crash released four albums From The in 10 years and sold records in 30 countries between 1999 and 2009. “The Crash was an appropriate name,” Coal Face says Brunila ruefully “as we lived through the great crash of the music business.” Some critics may suggest The Indie Label that the band should not have suffered Keith Armstrong is the co-founder as increasing live revenues would have of Kitchenware Records, based in offset falling record sales, but Brunila the northern UK city of Newcastle. dismisses that view. “90 per cent of our Kitchenware is a development label, yearly income as a band came from often signing artists at the very copyright channels, not live, despite the beginning of their career. band touring 20 countries. Make no mistake, in a world with no copyright “When we were starting out back “We live in a world where protection, freedom of information will in the early 80s,” recalls Armstrong €1 is considered extravagant become freedom from information “there was a campaign running because no one will do a damn thing called ‘Home taping is killing music’. for a music download.” creatively. Song writing would cease to Our slogan was ‘Home taping broadens Teemu Brunila, singer-songwriter be a profession.” minds’. But illegal file-sharing is in a completely different league and is have done really well in the dance He cites an example. “One year the devaluing and cheapening the way charts, but I’ve seen online that there band played Valmiera, the biggest people perceive music.” have been 15,000 illegal downloads of music festival in Latvia. We drove in their next single that hasn’t even begun from the airport and heard our songs Armstrong says that for many of to play on the radio yet and won’t be on the radio. We headlined the festival his acts, the revenue coming in from released until next year. Not every one and the 10,000-strong crowd roared their first sales is essential to help of those downloads was probably a lost out our songs. When we came off stage them sustain their career. “That revenue sale, but even one in three of them I asked our label representative how is recycled straight away into building would have bought the girls some vitally many records we had sold in Latvia. The their profile and taking them to the needed tour support.” answer was like a slap in the face. 200.” next level, but it is disappearing.” Armstrong says: “I used to work in HMV, As he now concentrates on song He cites Editors as an example of an and if someone came in and started to writing, Brunila is aware that many act that has proved highly successful steal records we’d chase them down the in his profession have been badly in the UK and Europe and seems street. Uploaders are doing essentially squeezed by falling music sales. popular in the US but is unable to the same thing as those shoplifters. My “The average songwriter in Finland earns establish sales there. “The guys regularly artists are being hit. Editors and Sirens €1,600 a year before tax, discounting sell out plenty of four thousand seat both backed Lily Allen when she took a performance fees. Just 200 songwriters venues on both coasts, but their albums stand for new artists last year and said earn more than €20,000 a year. That has only sell 50,000 copies. They seem at this had to stop.” come about because we live in a world the mercy of the piracy culture.” where €1 is considered extravagant The Artist-Songwriter for a music download, but a couple of Sirens, an all-girl dance act, have a very Teemu Brunila is a Grammy Award- euro is considered reasonable for different profile, but suffer from the winning singer-songwriter from Finland a Starbucks coffee.” n same problem. “We’ve promoted them and former lead vocalist of The Crash, in the dance clubs and their first singles Piracy is hitting Kitchenware’s acts Sirens and Editors

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