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Global Digital Sales Drive Music Growth

Expansion of services in developing nations spurs 9% gain in revenue for 2012

Growing international digital sales and streaming are driving the music business to renewed health thanks in large part to fast-growing demand in developing markets, according to a report issued Tuesday by the Intl. Federation of the Phonographic Industry, the global music trade body.

Worldwide digital revenues climbed $500 million in 2012 to $5.6 billion, reflecting a 9% increase over the previous year. The digital side accounted for 34% of the total biz. Total global music revenues for 2012 reached $16.5 billion, up 0.3% from $16.2 billion in 2011.

“The new digital services developed and licensed over recent years are moving rapidly into new markets across the world,” IFPI chief exec Frances Moore said. “Record companies’ strategies of proactively licensing across different revenue channels are paying dividends, too.”

The market for digital retailing and streaming of music is developing quickly around the globe. IFPI noted that at the start of 2011, the major international services were present in 23 countries; two years later, they are present in more than 100 territories, including such nations as Kenya, Sri Lanka and Vietnam, which saw their first digital services open last year.

Download sales rose 12% in 2012, with 2.3 billion single tracks downloaded (up 8%) and 207 million digital albums sold (up 17%) worldwide. Paying subscribers to streaming services leaped 44%, with 20 million paying subscribers globally.

On the subscription front, the U.S. market still lagged somewhat behind other territories. Just 19% of American Internet users used a subscription service, while 28% paid to download music. In contrast, 48% of Web users in Sweden (birthplace of Spotify) employed a subscription service, while only 11% bought downloads.

Awareness of some licensed services was high, with YouTube (90%) and iTunes (70%) leading the pack. At 56% and 31%, respectively, Spotify and France-based Deezer (still unavailable in the U.S.) enjoyed a lower profile.

The report noted that download stores received a lift from cloud-based features like Apple’s iCloud (used by 190 million people) and Amazon’s Cloud Player. Google and Microsoft launched their own cloud-based services last October.

IFPI called subscription services “the fastest growth area in digital music,” as the subscriber base gained 44% in 2013 and revenues rose 59% in the first half of the year. Spotify, the largest brand internationally, gained 2 million paying subscribers in 2012, reaching a total of 5 million.

Significantly, such growing international subscription players as Deezer and Scandinavia’s WiMP took full-page ads in the IFPI report.

The trade group also noted the burgeoning importance of online radio in the North American market, pointing to gains at Pandora (which now accounts for 8% of U.S. radio listening) and Slacker (with 23 million registered users).

Among bestselling albums, U.K. thrush Adele’s “21” led the field globally with sales of 8.3 million. She was succeeded in the top five by Taylor Swift’s “Red” (5.2 million), One Direction’s “Up All Night” (4.5 million) and “Take Me Home” (4.4 million) and Lana Del Rey’s “Born to Die” (3.4 million).

In a sidebar breakout, the report noted that boy band One Direction “(mobilized) an online army,” and that the group was responsible for 21 million daily digital interactions in 2012.

Carly Rae Jepsen’s “Call Me Maybe” led global digital singles sales with 12.5 million units, followed by Gotye’s “Somebody That I Used to Know” (11.8 million), PSY’s “Gangnam Style” (9.7 million), Fun’s “We Are Young” (9.6 million) and Maroon 5’s “Payphone” (9.1 million).

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