Digital revenues on the rise.

The global music industry recorded another downbeat tune in the first half of 2005 when total sales of physical recordings slumped 6.3% in value to $12.4 billion in retail value, and 6.6% in unit sales.

The negative figures, published by international trade body IFPI today (Oct. 3), were attributed to lower retail prices on physical CDs, a slight drop in DVD music video sales, and illegal downloads and CD burning.

However, the rapid growth in digital sales counteracted to slash the global loss rate to just under 2% in retail value.

"We've known over a long period of time about the problems with physical sales," say John Kennedy, IFPI's London-based chairman and CEO. "But we feel this year's fairly close to last year as the number of markets where digital music has found its feet grows. There is great cause for optimism."

Kennedy believes there is a good chance that the international industry will report a flat year by the end of 2005. "If we get two years in a row, we will see the start of a turnaround," he tells Billboard.biz.

Yet, despite the gloomy picture of total sales, caused mostly by the poor performance in physical formats, digital sales provided some positive news.

For the first half of 2005, digital music helped the total global music market fall by a comparatively more generous 1.9% to $13 billion in the first of this year.

Digital sales, including mobile-phone downloads but excluding ringtones, tripled to account for 6% of the total [physical and digital] global business.

IFPI estimates that digital sales more than tripled to $790 million during the same period from $220 million during the first half of 2004.

Some of the most successful digital markets included the United States, where single-track downloads jumped threefold to 159 million in the first half of this year, compared with the same period in 2004.

Another successful digital market was the United Kingdom, where single downloads via the likes of iTunes Music Store and Napster rose 10-fold to 10 million units.

In Germany, single downloads soared to 8.5 million from 1 million during the same period, while jumping to 4 million from 1 million in France.

The most spectacular digital performance was in Japan, where online and mobile sales combined yielded $133 million in revenue, with mobile sales representing a staggering 96%.

"Over the last couple of months, we've had (litigation) successes in the U.S., China, Korea, Taiwan and Australia, sending a strong legal message that illegal peer-to-peer downloads are not as attractive as they used to be," Kennedy adds.

Looking at individual markets, even the United States, the world's single biggest music market, reported a 5.3% drop in retail value of physical sales to $4.8 billion.

This is despite the success of albums such as "The Massacre" by 50 Cent (G Unit/Aftermath/Interscope), "The Emancipation of Mimi" from Mariah Carey (Island/Def Jam,), and "The Documentary" from The Game (G-Unit/Aftermath/Interscope), which were the three best-selling albums during the period.

Piracy, compounded by a decline in music-club sales, drove down unit sales at a similar rate (5.7%) to 326.8 million.

Kennedy admits, "The slump in music clubs has been there for a while, but is a bit more pronounced this year as music becomes more accessible both online and in stores."

The leading markets in Europe, the second biggest region after North America, also suffered physical sale losses in the first six months of this year.

In the United Kingdom, the world's third largest music market after the United States and Japan, physical sales decreased 4% in value to $1.25 billion.

Spain recorded the biggest fall in value among Europe's top five physical markets with a 15.7% drop to $232 million, followed by Italy with a 12.3% decline to $278 million.

German physical sales value was down 5.8% to $888 million, due to a decline in the record clubs and premium-priced CDs.

France recorded the lowest fall among the major music markets. French business only fell 2.7% to $861 million, and unit sales rose 7.5% to 57 million.

In Asia-Pacific, physical sales in the world's second biggest market Japan fell more than 9% to $2.3 billion.

In Australia, where sales value suffered a 12% loss to $260 million, the sector's problems were exacerbated by the country's first recorded slump in DVD music video sales.

Mexico was the only country among the top 20 to offer some good news with a 21.5% jump in physical sales value to $188 million, thanks to effective lower-price marketing and anti-piracy campaigns; unit sales soared 44%.

Questions? Comments? Let us know: @billboardbiz

Print