IFPI reports that 95% of Music downloads are illegal, industry loses £180 m

A recent report by the International Federation of the Phonographic Industry (IFPI) has revealed that an estimated 95% of all music downloaded are illegal.

The figures from 2008 show that 40bn music files were illegally shared in 16 countries, presenting further sobering news to the recorded music industry and demonstrating that despite the expanding popularity of download sites such as I-Tunes, most music downloaded equates with no revenue going to record label or artist.

The report took responses from a number of consumer surveys over the last three years about downloading habits and compared them with the 2.3bn legitimate online tracks that were sold in 2008.

The report goes on to suggest that within the UK market alone, the record industry lost £180m last year, and will stand to lose more than £1bn by 2012 if current habitual consumer trends continue and customers continue to use torrent-sharing sites such as Pirate Bay and Iso Hunt to illegally download tracks and albums.

The UK saw the biggest increase in digital sales in the first half of 2008 among the top markets around the world, with sales up by 45%. A total of 110m single tracks were downloaded in 2008, up 42% on the year before. Digital album sales also rose significantly, by 65% to 10.3m, and now account for 7.7% of the albums market.

However, the report also found that consumer demand for music is higher than ever, despite a tangible decline in CDs sales last year.

For some time now, the key issue for the industry has been how music companies will find effective new business and delivery models to deal with such a dramatic paradigm shift and translate the appetite for new music into viable revenue streams.

The IFPI also discovered that paid-for single track down loads now drive the online market, with sales exceeding 1.4bn.
The biggest selling download singles of last year included the songs ‘Sex on Fire’ by Kings of Leon and ‘Mercy’ by Duffy.

Concluding the report, the IFPI looks towards newly developed subscription services for digital music as evidence that the industry is adapting to the climate change.

Licensing music to third parties is also proving to be mutually beneficial for both the music and blossoming games industry, with the popularity of interactive music games such as Rock Band and Guitar Hero accounting for a staggering 15% of overall industry sales in the first half of 2008.

Have your say - Do you legally download tracks and albums? What should the new business model be? Would you like to see more innovative ‘honesty box’ releases such as Radiohead’s ‘In Rainbows’? If so, how many bands are realistically in a position to do that? What are your thoughts on licensing music to third parties such as video games?