Music Industry Up On Downloads

By Joseph Palenchar -- TWICE, 1/20/2005

London — Authorized music downloading is on the upswing in a way that pleases the international music industry.

Music fans downloaded “well over” 200 million tracks in the United States and Europe in 2004 for a 10-fold increase, according to the International Federation of the Phonographic Industry (IFPI). The organization represents 1,450 recording-industry companies in 75 countries.

The United States accounted for 140 million downloaded tracks, up from the previous year’s 20 million. A total of 5.5 million albums were legally downloaded that year, the IFPI added.

Download growth, “helped bring record companies their first year of significant revenues from digital sales, running into several hundred million dollars,” the IFPI said. Market research company Jupiter estimates that U.S. consumers paid $330 million in 2004 to download music legally and will double their purchases in 2005, the IFPI noted.

In five years, the IFPI said, some analysts and music companies expect downloads to account for 25 percent of industry revenues compared to a current 1 percent to 2 percent.

In charting downloads’ uptake, the IFPI also said:

The number of legal music sites in the United States and Europe quadrupled in 2004 to more than 230, up from the year-ago 50. More than 150 of them are in European countries.
The number of songs authorized for downloads doubled in a year’s time to 1 million by the end of 2004.
The number of music files on unauthorized peer-to-peer networks and other Internet sources fell to 870 million in January from a year-ago 900 million. Infringing music files solely on peer-to-peer networks fell to an estimated 760 million from January 2004’s 800 million, down substantially from 1 billion in April 2003.
Only 15 percent of individuals using illegal peer-to-peer services are responsible for 75 percent of the music files distributed illegally on peer-to-peer networks is

The growing urge to download has coincided with rapid growth in portable digital music players.

In 2004, factory-level sales of flash-memory and HDD headphone portables rose 184% to an all-time high of $1.2 billion, according to CEA estimates. That compares to a measly $80 million in 2000.

Sales of portable devices playing compressed music has reinvigorated the portable audio market, which suffered two consecutive years of dollar-sales declines in 2001 and 2002, CEA statistics show. In 2003 and 2004, MP3-type portables were solely responsible for the surge in portable-audio sales, which comprise MP3-type headphone stereos, CD- and cassette-based headphone stereos, and boomboxes. Combined portable-audio sales rose at the factory level by 2.8% in 2003 and by 18.5% in 2004 to an estimated $2.18 billion, CEA statistics show.

For the most part, the majority of units sold incorporate mass-storage hard disk drives (HDDs), according to point-of-sale data collected by NPD Group. For the 12 months ending November 2004, HDD models accounted for 57% of unit MP3-portable sales and 73% of dollar sales at the retail level. That compares to 30% of unit sales and 50% of dollar sales for the year-ago period. During that time, retail-level HDD sales grew an astounding 279% in units to 2.5 million and 230% in dollars to $760 million, NPD said.