Music Downloads Double in 2006, Fail to Offset Piracy

A surge in downloaded songs and mobile-phone ringtones failed to make up for declines in sales of compact discs last year, an industry group said. Music downloads almost doubled to about $2 billion last year, accounting for about 10 percent of the industry’s global sales, the International Federation of the Phonographic Industry said in a statement today. While that’s up from 5.5 percent in 2005, it’s still not enough to offset the revenue lost due to piracy and declining sales of physical media such as CDs. “I would like to be announcing that a fall in CD sales is being compensated for by an equal or greater increase in online and mobile revenues,” John Kennedy, chief executive officer of the London-based industry group, said in the statement. “But that is not yet happening on a global basis.” The four biggest music companies, Vivendi SA’s Universal Music Group, Sony BMG Music Entertainment, EMI Group Plc and Warner Music Group Corp., are counting on rising sales of downloads. The IFPI repeated its forecast that downloads will account for at least 25 percent of industry sales by 2010. Global music sales fell 4 percent in the first half of 2006 as a 10 percent drop in physical sales outweighed gains in downloads, the IFPI said in October. EMI said last week that sales in its recorded-music unit may fall as much as 10 percent in the year ending in March. The London-based company cited disappointing holiday sales. Track Availability Consumer demand for digital music has been met by an increase in the number of tracks available online, which has doubled to more than 4 million on “leading” services in the last year, the IFPI said. There are currently 498 online music services available in more than 40 countries, it said. “We are encouraged by the growth of online and mobile music sales,” Thomas Hesse, president of Global Digital Business at New York-based Sony BMG, said in the report. “As our physical revenues continue to decline, we need to proactively continue to build digital growth and identify new digital opportunities.” Digital music accounted for more than 80 percent of singles sales in 2006, the IFPI said. Digital sales have “completely” replaced the physical singles market in the U.S., Canada and South Korea, the IFPI said. In the U.S., single track downloads rose 65 percent to 582 million last year, the IFPI said, citing Nielsen SoundScan. In South Korea, digital music represented 57 percent of the music market in the first half of 2006, the IFPI said. Apple Inc. Chief Executive Officer Steve Jobs said last week that the maker of iPod music players has sold more than 2 billion songs on iTunes, its online music and video store. In 2006 iTunes sold more than 1 billion tracks, the IFPI said. Sales of portable music players rose 43 percent to 120 million units last year, the IFPI said. Microsoft Corp. introduced its Zune player in the U.S. in November. The world’s largest software company expects to sell 1 million units of the device by the end of June, the IFPI said.