IFPI claims global digital sales will soon tip the balance

24 January 2012

by Eamonn Forde

The IFPI published its Digital Music Report 2012 yesterday (23rd January), looking at digital revenue globally for last year. Despite the champagne corks flying due to the continued diversification and growth of the digital sector, a decade after the iPod and digital is still unable to offset the decline in the physical business as CD revenues continue to slump.

First, the good news. Digital revenues grew by 8% in 2011 to a trade value of $5.2bn [A$4.9bn] and the report noted that services are expanding at a phenomenal rate outside of the major global markets. At the start of 2011, key digital brands such as iTunes, Spotify and Deezer were live in 23 markets but this had more than doubled to 58 markets by the start of this year.

Single track downloads grew by 11% (by volume) while digital album downloads increased by 24% (by volume) last year, with 3.6bn legal download purchases in total being made last year. Meanwhile subscription services (the industry’s current golden child) saw a 65% increase in the subscriber base globally to 13.4m customers globally (a combination of standalone subscriptions and those bundled into a monthly broadband/mobile package or rolled into the cost of a handset – but how exactly this was split was not broken down).

Globally, digital now accounts for almost one-third (32%) of industry revenues, up from 29% in 2010. In certain markets, digital now makes up the majority of label income ¬– notably the US (52%) and South Korea (53%).

IFPI CEO Frances Moore said, “There’s been a real building of momentum over the last year.” She added, however, that piracy remains a serious challenge and this year will see renewed industry pressure on not just pirate sites but also ISPs and others like Google to assist in cauterising the wound.

The IFPI was unable to give complete numbers for the total market in 2011 (it is still processing sales figures from the markets reporting into it) but expects that we will see a 3% fall in value from 2010 (where it dropped by 8% from 2009), suggesting the global decline is slowing (although after over a decade of slides it is debate just how much further it could fall). Its director of market research Gabi Lopes took the optimistic route by saying, “It’s the best result we’ve had since 2004.”

Rob Wells, the president of global digital business at Universal Music Group, this year will be a key one for the industry and help lay the proper foundations for growth. “My crystal ball is telling me that 2012 is going to be a significant year in the history of the music industry,” he said. “What we are seeing is significant progress. New services coming on stream, new models and modes of consumption being embraced by consumer groups.”

But with the full 2011 figures coming soon and an expected market dip of 3% for digital and physical combined, where is the long-promised inflection point where digital will push the overall market back into growth?

“The problem with the inflection point is that it’s a moving target,” said Wells. “If you look on a market-by-market basis, some of these markets have already inflected and there are some markets where we haven’t actually had a viable music business before and they have jumped straight to digital. But I think 2013 is a safe bet [for the inflection point].”