The Download War Rumbles On

“Music at the touch of a button” is the subtitle of the International Federation of the Phonographic Industry’s Digital Music Report 2011. In a sense it gets to the kernel of the problem facing the worldwide record industry. There is now so much music available to the public, free and at the click of a mouse, that the industry – as well as artists – has a real fight on its hands in attempting to roll back the tide that has been flowing against it since the days of Napster.

But the industry is not for lying doggo. A campaign to stop digital music piracy is gaining momentum worldwide, with various governments realising they have a responsibility to reduce or eradicate what licencing bodies view as copyright theft. The IFPI applauds the fact that warnings and deterrent sanctions are now in place in Ireland, France and South Korea, with other countries, including the UK, New Zealand and Malaysia, expected to implement new laws in 2011. Meanwhile, the European Union is undertaking a complete review of its intellectual property enforcement legislation.
As the IFPI’s chief executive Frances Moore put it with some degree of optimism, “This was the year we broke the seal on subscription services. Highlights included the advance of music subscription services such as Spotify and Deezer, as well as partnerships with ISPs such as Telia in Sweden and Eircom in Ireland.”
But these developments have to be seen against a backdrop that is deeply disturbing for those who work in the industry. Although music income from digital sources increased tenfold over the past seven years, the value of the entire recorded music industry decreased by a third over the same period.
Myths are being dispelled by reality, including the belief that downloads would compensate for the drop in physical sales, and that any losses from the free availability of music would be compensated by income from live gigging. The notion that the internet would be a boon for local artists, new acts and small independent labels is another fading fantasy. For example, in Spain in 2004, local acts represented about 80% of sales. That’s now down to 40%. There were no new local debut albums in the Top 50 in Spain last year or the year before, while that country’s total market is down an astonishing 77% since 2003.
The top five grossing live acts last year were Bon Jovi, AC/DC, U2, Lady Gaga and Metallica. Lady G is the only newcomer, with virtually all of the top touring earners coming from the pre-internet generation. The Grammy-winning multi-instrumentalist Imogen Heap is merely one of many artists who have admitted they may no longer be able to tour as a result of the increasing unwillingness of record companies to support tours. The theory that artists can enjoy serious income from merchandise sales at gigs only seems to work for established artists anyway.
While it’s misleading to argue that all illegally downloaded tracks represent lost sales, Moore reckons there’s one sale lost for every 10 illegal downloads. And it’s hard to deny the link between lost income and piracy. Spain, which with 45% has the highest level of internet users receiving music illegally, has experienced a drop last year alone of total music sales by 22%.
Explaining a decision we may see mirrored all over the globe, Max Hole, chief executive of Universal Music Group International, says the label halted investments in new artists in South Korea on account of the country’s substantial illegal downloading. But, he added, “Now we’re back, due to their government implementing graduated response.”
And the idea that the internet would be good for small independent labels has also been undermined. As one sizeable indie label in Italy put it, “We can’t downsize. We can only close.” To emphasise the point that illegal downloading is as damaging for small indie labels as it is for the majors, Hole believes that about half of Japan’s indie labels have closed.
Meanwhile, statistics show that fewer new artists are breaking through internationally. Total sales by debut artists in the global top 50 album chart in 2010 were just one quarter of the level they achieved in 2003. With so many markets in recession, there are substantial social consequences on the jobs front in a declining record industry. Independent research has found that 1.2 million jobs could be lost by 2015 across the creative industries in Europe alone if no action is taken to tackle piracy.  
Doubtless there are counter-arguments on some of these issues but the position is still bleak. The IFPI report underlines a simple fact, that as fewer people pay for their music, the investment of time, resources and money in new artists by both independent labels and major corporations dwindles accordingly. But with some countries, including Ireland, taking positive steps to turn the tide, the position remains fluid. Recent initiatives by Eircom and the arrival of We7 are giving Irish music fans fewer excuses for going the illegal route. Getting more money into artists’ hands is still not going to be easy.