Over 95% of Music Downloads Illegal According to Report

According to the International Federation of the Phonographic Industry (IFPI) 95 per cent of music downloads are unauthorized, with no payment to artists and producers. The music industry has transformed its business models, offering consumers an increasing range of new services with leading technology partners. Yet generating value in an environment where 95 per cent of music downloads are illegal and unpaid for is still the biggest challenge for music companies and their commercial partners.

The digital music business internationally saw a sixth year of expansion in 2008, growing by an estimated 25 per cent to US$3.7 billion in trade value. Digital platforms now account for around 20 per cent of recorded music sales, up from 15 per cent in 2007. Recorded music is at the forefront of the online and mobile revolution, generating more revenue in percentage terms through digital platforms than the newspaper (4%), magazine (1%) and film industries (4%) combined.

At the same time, a new generation of music subscription services, social networking sites and new licensing channels is emerging. These were led in 2008 by services like Nokia Comes With Music, MySpace Music and a raft of partnerships with Internet Service Providers (ISPs), such as TDC in Denmark, Neuf Cegetel in France, TeliaSonera in Sweden and BSkyB in the UK.

Despite these developments, the music sector is still overshadowed by the huge amount of unlicensed music distributed online. Collating separate studies in 16 countries over a three-year period, IFPI estimates over 40 billion files were illegally file-shared in 2008, giving a piracy rate of around 95 per cent.

IFPI's Digital Music Report 2009, published today, gives a comprehensive overview of trends in the music business internationally. It shows an industry that has shifted its approach from one based only on unit sales of music to "monetising" access to music across a multitude of channels and platforms.

Single track downloads, up 24 per cent in 2008 to 1.4 billion units globally, continue to drive the online market, but digital albums are also growing healthily (up 36%). The top-selling digital single of 2008 was Lil Wayne's Lollipop with sales of 9.1 million units - 1.8 million more than the 2007 best selling digital single.

The Report also shows how the digital age is expanding the role of music companies in developing and marketing artists and it outlines the progress being made internationally in getting ISPs to cooperate to curb mass-scale copyright infringement on their networks.

John Kennedy, chairman and chief executive of IFPI, says: "The recorded music industry is reinventing itself and its business models. Music companies have changed their whole approach to doing business, reshaped their operations and responded to the dramatic transformation in the way music is distributed and consumed.

"There is a momentous debate going on about the environment on which our business, and all the people working in it, depends. Governments are beginning to accept that, in the debate over "free content" and engaging ISPs in protecting intellectual property rights, doing nothing is not an option if there is to be a future for commercial digital content."

The International Federation of the Phonographic Industry (IFPI) is the organization that represents the interests of the recording industry worldwide. As of 2008, the IFPI represents approximately 1,400 record companies in 73 countries. Its stated policies are to fight copyright infringement; promote industry-friendly copyright laws; and lobby for legal conditions believed to be in the interest of recording companies, including DRM.