MUMBAI: Music shipments of all physical formats in America to retail and other outlets declined by 5.8 per cent in the first half of the year.
At the same time a growing legal digital marketplace helped to offset the overall decline, according to data released by the Recording Industry Association of America (RIAA).
While the area of legal digital downloads showed some progress, the music industry continues to be impacted by illegal online downloading, rampant unauthourised CD burning and traditional counterfeiting of physical products. These various forms of piracy are the primary culprits for a 6.5 per cent decline in CD shipments from record companies to various distribution channels the RIAA states.
Even as the overall market declined, legal digital sales of singles grew 154 per cent in the first six months of 2005, compared to January – June of 2004. In the first half of 2005, 148.7 million digital singles were downloaded, compared to 58.6 million in the first half of 2004; 5.1 million full-length albums were downloaded from legal online music sites in 2005, compared to 1.5 million full-length albums downloaded in the first half of 2004. The total estimated retail value of digital singles and albums sold in the first half of 2005 was $198 million, compared with $73 million for the first half of 2004 (estimate derived using current prices of $0.99 and $9.99, respectively).
Despite important and effective strides by the music community to begin to slow the effects of piracy, it remains an ongoing threat to the legitimate sale of music online and in record stores. Analysis by the NPD Group reveals that burned CDs accounted for 29 per cent of music obtained by listeners in 2004. The NPD study showed that among households with Internet access that are burning CDs, 17 per cent of those are burning more than 10 CDs per month. According to Nielsen SoundScan, record store sales of the Top 200 albums, the most frequently illegally burned and downloaded, declined from 102.8 million units to 93 million units, when comparing the first half of 2005 versus the first half of 2004.
When shipments of all physical products are combined with sales of digital downloads, the total unit count for the first half of the year is 343.9 million, which represents a 2.4 per cent decline. The growth and potential of the emerging digital marketplace is also reflected in new RIAA surveys and analysis. According to a June 2005 survey by Public Opinion Strategies (POS), on behalf of the RIAA, twice as many adults (ages 18 – 54) have paid to download music as compared to a similar survey last year – 13 per cent in 2005 versus six per cent in June 2004.
Additionally, according to that same survey, the percentage of adults who have paid to download music legally is now higher than the number of adults who have downloaded music from an illegal peer-to-peer network – 13 per cent have paid to download while 12 per cent say that they have downloaded illegally from a peer-to-peer site.
RIAA chairman and CEO Mitch Bainwol said, “Even as we continue to transform ourselves and transition to the digital marketplace, the music community is still suffering enormously from the impact of various forms of music theft. One of the stories we need to repeatedly tell in the coming months is that illegal downloading and burning continue to compromise the industry’s ability to invest in the new bands of tomorrow.
“At the same time we are encouraged by the growth of the digital music marketplace. Music labels are working closely with their technology partners to offer fans an incredible, high-quality experience – from download to subscription to legal peer-to-peer sites. And by handing down the unanimous Grokster decision, the Supreme Court has done its part to help level the playing field for all legitimate players. The debate about right and wrong has been settled.”
Bainwol also said that the music companies have worked diligently over the last several years to respond to consumers’ demands by offering high-value music experiences. Fans’ passion for music, as well as the importance that it plays in their lives, is as high as ever. According to a survey conducted for the RIAA by Taylor Research, 91 per cent of adults polled said that listening to music is important in their daily lives.
In addition to an unprecedented array of digital ways to access music – download services, subscription services, nascent legal peer-to-peer services, cell phone ring tones and ring tunes, and Internet and satellite radio – music companies are working closely with retailers and others to develop exciting high-value offerings in physical formats. DualDisc, a new product that combines music, film and video on a single, two-sided disc, shipped more than seven million units in the first half of 2005, including two consecutive No. 1 albums earlier in the year.
Bainwol adds, “In a relatively short amount of time, this industry has revolutionised itself and the way it does business. We are responding to consumers, working with our partners in various technology industries, and delivering some of the best music ever to our fans.”
