Global Report Highlights Continued Challenges in Music Monetization

So, looks like as much as they try to make digital work, the labels are still struggling to monetize music – this according to a recent report from the International Federation of the Phonographic Industry (IFPI) (The 2009 study can be downloaded here). Best summarized in the release: “The music industry has transformed its business models, offering consumers an increasing range of new services with leading technology partners. Yet generating value in an environment where 95 per cent of music downloads are illegal and unpaid for is still the biggest challenge for music companies and their commercial partners.”

So, what’s the good news? From a glass half full perspective, global digital music business grew 25% in 2008, reaching $3.7 billion (in trade value). And, digital now represents 20% of recorded music sales (up 15% from 2007). The report also noted positive trends contributing to growth – including subscription services, including mobile platforms (Nokia Comes with Music, Sony Ericsson’s PlayNow plus and Danish ISP TDC’s new music service PLAY); partnerships with broadband providers, ad-supported services, such as MySpace Music; a-la-carte download sales efforts (e.g., AmazonMP3, DRM-free efforts); music licensing to third parties (such as games sector), among others.

But, I go back to the 95% pirated. It remains to be seen whether the combination of the positives above can turn the tide in online piracy, particularly at a time when consumers are feeling the financial pinch. We will have to take a look next year and see if the 95% ticks down, if at all. I hate to take the glass half-empty view, but I doubt it.

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