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Music sales continue to fall

Digital fails to replace lost CD revenue

LONDON — Despite a massive surge in digital music sales last year, the popularity of the fledgling market is still not making up for the slide in physical products, such as CDs.

According to figures released by the International Federation of the Phonographic Industry, the global recorded music market in 2006 slipped by 5% year on year to $19.6 billion last year, down from $20.7 billion in 2005.

The gloomy news marks the recorded music industry’s seventh consecutive year of falling sales, according to IFPI’s annual Recording Industry in Numbers publication, as piracy continues to ravage the business around the world.

Sales of physical product fell 11% to $17.5 billion in 2006 as consumers turn away from purchasing CDs in favor of getting their music through other means.

The bright spot for the record labels was the 85% increase in global digital sales, which accounted for $2.1 billion, not including mobile phone ringtone revenues.

However, IFPI chairman John Kennedy claims that while 795 million tracks were legally downloaded online during 2006, a staggering 20 billion files were illegally downloaded in the same period.

“While digital sales have grown as expected, physical sales have fallen by more than expected,” said Kennedy. “Labels have risen to the challenges of this new era by experimenting with innovative business models and diversifying revenue streams.”

Kennedy reveals that digital sales are predicted to grow by up to 50% this year, to total more than $3 billion. But he admits there is still more to be done in the digital market to provide consumers with music on every type of device, while minimizing the avenues for copyright infringement.

“While we have come a long way, we still don’t have a seamless solution for digital music delivery and management,” added Kennedy.

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