Digital Music Triples in First Half of ’05

The IFPI reports digital music sales tripled to 6 percent of retail music revenue in the first half of 2005, nearly offsetting the market's overall decline.

The International Federation of the Phonographic Industry (IFPI), a UK-based international organization representing the recording industry, reported today that, during the first six months of the year, growing demand for digital music via the Internet and to mobile phones nearly offset the years-long decline in worldwide music sales in physical formats. For the first half of 2005, the IFPI estimates the retail value of digital music sales totalled some $790 million, up from $220 million during the first half of 2004. This revenue accounted for approximately 6 percent of the $13 billion worldwide music market.

Excluding retail margin, digital music sales brought in $440 million from sources like digital download services, music subscription services, and mobile music providers including both downloads and ringtones. The new figures also mean the digital music market has overtaken the worldwide market for music singles. The world’s five leading markets—the United States, Japan, the UK, Germany, and France—account for the bulk of the revenue, but the IFPI expects increasing availability of broadband, high-quality portable music players, and 3G mobile devices to lead to the rapid rise of digital music sales in additional markets.

The IFPI also attributes the growth of digital music sales to the music industry’s approach to curbing music piracy, which the industry blames for overall declines in music sales in recent years. By offering legal digital services as well as aggressively pursuing pirates with legal actions (such as the thousands of lawsuits filed by the RIAA in the US against alleged file-swappers, plus recent court decisions against P2P services Kazaa and Grokster), the IFPI argues the industry is offering easy means for consumers to legally acquire music, while actively discouraging illegal piracy. Nonetheless, the IFPI holds "digital and physical piracy remain a big threat to our business in many markets."

Physical music sales declined in all major markets save France (where discounting led to an overall increase in unit sales, although the market still saw a revenue decline). Overall, the global music market saw a 6.6 percent decline in physical music sales, with a corresponding revenue drop of 6.3 percent. In Japan, the world’s second-largest music market, physical sales were down 6.9 percent with a revenue decline of 9.2 percent.