Music industry in trouble
2007-01-28 15:52
Cannes, France - Rampant online music piracy and plummeting CD sales over the past five years have rocked the global music industry to its core.
And with the new digital revenue streams from online music stores and mobile phones still way too low to fill the gap, the industry is looking to new horizons.
Between 2000 and 2005, the record industry worldwide shrank by 34% in value terms, a trend that continued last year.
Internet piracy remains a massive problem for the music industry, particularly in eastern Europe, India and China, though the large number of actions taken against illegal file-sharers globally has achieved some success, according to the global recording industry body, the International Federation of Phonographic Industries (IFPI).
In France, for example, the percentage of internet users illegally downloading tracks fell from 24% to 14% in 2004 after the government announced it would take them to court. But by 2006 it had crept back up again to 21%.
Desperate times
But the even more worrying news is that while digital music sales to PCs, portable devices and mobile phones nearly doubled to $2bn in 2006, they still accounted for just 11% of global music sales, failing to achieve the "holy grail" of offsetting the fall in CD sales, the IFPI emphasised.
As a result, the music industry is becoming increasingly desperate to find new ways to turn music content into cash and unlock the promised riches that the new digital world of online stores, music-enabled mobile phones and mobile players has been promising to deliver for the past few years.
The growing trend to give music content away for free, particularly on the internet, has also raised the temperature.
This sense of urgency dominated the industry's premier MIDEM trade show that closed its doors here on Thursday, where it looked that the way forward will be through a lot of different revenue channels rather than one big pipe.
How to make money
The newest opportunities attracting keen interest and much debate here included how to make money by working with brands, advertising, film, TV, video game and internet worlds as well as by releasing the record companies' huge back catalogue.
The relationship between advertising brands and music has become a lot closer over the last five years and will deepen further in the future, industry experts here underlined.
The recent link-up between cellphone maker Motorola and animation leader Gorillaz was a recent example that helped Gorillaz penetrate the Chinese market.
Internet advertising and ad-funded digital services also look likely to become important new ways to make money.
"There is certainly a space for ad-supported music," Sony BMG Music Entertainment's Thomas Gewecke told a MidemNet conference. He pointed out that while music purchasing is at an all-time low, "music consumption is at an all-time high".
Social networking
Some companies, like Intent Mediaworks, said it has been licensing ad-supported content and putting it on peer-to-peer (p2p) networks, and making money.
2007 will probably also see record companies, particularly the independent ones, moving into the increasingly popular social networking websites such as MySpace and YouTube, industry experts predicted.
The deal announced here between Merlin, the new one-stop licensing agency set-up to represent the world's huge independent music sector, and innovative San Francisco-based digital music firm SNOCA, is aimed at giving the indies better access for selling digital downloads on MySpace and netting more money for them.
The big four record labels - Warner, Universal, EMI and Sony BMG - are also making moves into the online space that has been taking over their role as main music distributors.
EMI Music announced last November that it had formed a strategic alliance with Shanghai Media Group to offer content for mobile, online and TV distribution and others might follow as China makes moves to tackle piracy and attract foreign businesses.
Ringtones
Mobile phones were also centre stage although ringtones are still the only big revenue source for the music business.
The hot new music enabled phones being launched by top cellphone makers are expected to go head-on with the stand-alone MP3 players that are now a way of life for millions and may even outstrip them in the United States within two years, predicted key entertainment industry player Brad Duea, who heads up the now legal Napster US subscriber-based online music service.
It still remains unclear though just how big a slice of the mobile pie the music industries will get.