Chairman and Chief Executive, IFPI A personal view on what other communications businesses can learn from the music industry.
Among creative industries the music business has long been seen as villain and victim in the debate about how to adapt to the digital age. But things are changing. Today executives in other creative fields such as film, TV and book publishing talk less about music having “failed to adapt to new technology”, and more of how it has acted as a “pathfinder” in the internet world.
It is not hard to explain why. The music industry has transformed its business model in recent years, generating $4bn of digital revenues: indeed, as a proportion of overall sales record companies now earn more from digital channels than the proportion of earnings for the film, television and book industries combined.
The myriad online options available to music fans today are simply unrecognizable from a few years ago. They range from single and album downloads on iTunes and Amazon to advertising-supported sites like Spotify and We7. More will follow – for example, Sky’s United Kingdom music service which will bundle a tiered download offer with an ISP (internet service provider) subscription.
Such ventures are seen as attractive by the music industry, providing they can deliver a first-class consumer experience and sufficient revenues to pay artists and composers, while recouping record labels’ investments in the music they make available.
So why is the music business still fighting for its future? The simple answer is that a legitimate business cannot compete in an environment awash with free, unauthorized content. Dealing with this problem is the challenge facing creative industries generally, ISPs and governments.
Music piracy in the online world is immeasurably worse than in the physical market, with around 95 per cent of music downloads now unlicensed. Digital piracy has been a major factor in the fall in the trade value of music sales around the world from $25.8bn in 1999 to $18.4bn in 2008.
The bad news is that the situation has generally not improved over the last five years. The good news is that the needle does not have to move all that much to make a substantial difference to the legitimate digital music business.
This is a crisis not just for the music sector. It has critical implications for the wider creative economy, too, and the hundreds of thousands of people it employs.
There is a view that live music will save the industry while recorded music declines into obscurity. I believe that view is deeply flawed. That view ignores the particular relationship between live and recorded music: when people enjoy recorded music on a CD, on the radio or played in a bar or club they want to go and see the artists responsible perform live.