New Year, Same Old Slump

While IFPI chief John Kennedy was saying EMI would be making a "terrible mistake" if it decided to cease its membership to the music industry trade associations, his organisation was reporting a 10 percent slump in global record sales.

Both events are what the Financial Times described as "more bleak news" for the recorded music business.

"Frankly it would be a terrible mistake for Guy Hands to walk away from the trade associations because he’s got people working on his behalf to fight piracy and lobby governments to improve the environment and work with collecting societies around the world, which bring in $1 billion of revenues," Kennedy told the Daily Telegraph.

"It would be a blow to us, and to my mind, if you spend over £3 billion on an asset [as Terra Firma did on EMI last year] you have to preserve that asset."

Hands has threatened to cut EMI’s spending commitment to the IFPI and other trade associations, reportedly as part of his general cost-cutting measures and his apparent belief that some areas overlap.

Kennedy will see the need for unity at a time when his organisation is lobbying the government to look at the anti-piracy action being proposed in France, where the government is seeking to make Internet service providers responsible for illegal file-sharing and adopt a "three strikes and you’re out" policy to remove Internet access from repeat offenders.

The IFPI chief has described the French plan as "the most significant milestone yet in the task of curbing piracy on the Internet."

Even without legislation, the IFPI wants ISPs to take more responsibility for illegal file sharing by either disconnecting those who repeatedly upload music or preventing illegal tracks from being downloaded.

Its lobbying strength could be weakened if Britain’s EMI decided to jump ship.

Despite the IFPI’s diligence in fighting Internet piracy by bringing legal actions against heavy file-sharers, and the co-operations with European police forces that have led to the seizure of recording equipment and millions of pirate discs, the global music market still dropped by about 10 percent to US$17.6 billion (£8.9 billion) last year. Illegal downloads outnumber legal ones by 20 to one.

Sales of digital music via the Internet and mobile phones grew by 40 percent to about US$2.9 billion (£1.46 billion), but the rate of growth is still failing to cover the losses from the slump in international CD sales.

International CD sales fell by 11 percent between 2005 and 2006 and were expected to drop further in 2007. More disappointing is that digital music revenues, apart from not being able to compensate for that drop, are also showing signs of stalling.

From US$380 million in 2004, digital revenue roughly tripled in 2005 and nearly doubled in 2006, but last year it produced a modest 40 percent increase.

The IFPI said digital sales could be enhanced if record labels and telecommunications companies made it easier to listen to music on mobile phones, and if Apple was to cooperate on producing industry standards on software.

However, as in the previous seven or eight years, the curbing of Internet and physical piracy remains the recorded music industry’s biggest problem.

Despite the gloom and doom, Universal Music Group chief exec Jean-Bernard Levy was upbeat about the industry’s future during his January 26 keynote speech at MIDEM.