According to the ‘Digital Music Report 2007’ just published by the International Federation of the Phonographic Industry (IPFI), record labels have become digitally literate companies, selling an estimated US$2bn worth of music online or through mobile phones in 2006 (trade revenues), almost doubling the market in the last year. The IFPI report says that digital sales now account for around 10% of the music market as record companies experiment and innovate with an array of business models and digital music products, involving hundreds of licensing partners.

The bad news, if you’re a record company that is, is that while lawsuits have impacted illegal file-sharing, digital piracy is still considered by the IFPI as “…a massive problem for the music industry and one of the major reasons that the surging legitimate digital market is not expected to make up the shortfall in the decline of the physical market in 2006.”

The IFPI cites data from research analysts Jupiter that suggest that record numbers of high-profile lawsuits against large-scale uploaders in 2006 did have a deterrent effect on illegal file-sharers. The trade body also notes that as broadband penetration across Europe doubled to 40% between 2004 and 2006, the proportion of users regularly file-sharing fell from 18% to 14%. In the USA, lawsuits were the most cited reason by computer users for changing from unauthorised P2P to legal downloading (NPD Group, June 2006). Meanwhile, “…key successes…” against illegal operators were recorded in 2006, including Kazaa in Australia, Bearshare in the USA, ZoekMP3 in Netherlands and Kuro in Taiwan.

Not good enough says the IFPI, arguing that ‘gatekeeper’ ISPs must now be enlisted to act to curb digital piracy. “Other industries, such as film and newspapers, are struggling with the same problems that we have had to live with. As an industry we are enforcing our rights decisively in the fight against piracy and this will continue,” states IFPI chairman and ceo John Kennedy. “However, we should not be doing this job alone. 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.”

Help may be at hand, at least in the USA. Earlier this month a bipartisan quartet of US senators moved to reintroduce the Platform Equality and Remedies for Rights Holders in Music (PERFORM) Act left over from the last Congress. The four are Senator Dianne Feinstein (D-Calif.), Lindsey Graham (R-S.C.), Joseph Biden (D-Del.), and Lamar Alexander (R-Tenn.)

“The PERFORM Act would require satellite, cable and Internet broadcasters to pay fair market value for the performance of digital music. Additionally, the bill would require the use of readily available and cost-effective technology to prevent music theft,” according to Senator Feinstein. “I believe this legislation is a good step forward in addressing a real problem that is occurring in the music industry, and I encourage discussion to ensure that this law will fully serve the needs of our emerging technologies.”

We think: this will run for a while.
John Williamson