Evidence builds that stronger legal action against file sharing is turning round the fortunes of the music industry

The world is just emerging from one of the worst recessions in history and many countries around the world are only just starting to record economic growth. Despite this, 2009 may be the year recorded music sales started to turn a corner. The question many are asking is, what part has tougher legal played in the turnaround?

The global trade association the IFPI has published figures on the global music industry. Unsurprisingly, physical sales were down and digital sales were up. Digital is not yet compensating for the physical decline so the overall recorded music sales figure was down, by just over 7%. But this year’s report included details of quite a few countries that registered growth in 2009 compared with 2008, 13 to be precise. In six of these, growth in digital sales more than offset the fall in physical sales. In Brazil and Sweden, the sales improvement has been achieved by a rise in physical as well as digital sales.

The Swedish effect
Much has been written of the return to growth by Sweden. Earlier this year the local Swedish IFPI association said that the trade value of recorded-music sales increased 10.2% year-on-year in 2009, to SEK861.4 million, marking the first rise in the trade value of sales since 2000. Although the trade value of digital sales almost doubled, physical-album shipments rose by 7.6%. Extensive media coverage of the implementation of the IPRED law at the beginning of April, which allows rights holders to gain access to an infringing subscriber’s identity details, as well as coverage of legal action against the creators of The Pirate Bay torrent tracker site earlier in the year are thought to have been the main reasons for music sales growth. A GfK study in June last year found that 60% of file sharers had stopped using peer-to-peer networks.

Similar evidence of legal action changing file sharers’ attitudes is evident in France. The publicity surrounding the HADOPI legislation, which allows for the sending of warning letters to Internet users that infringe copyrights, was fairly intense in the second half of last year, a period that also saw a rise in the trade value of music sales. Although the trade value for the full year fell by 3.2% compared with 2008, for the final six months of the year the trade value actually increased by 9.3% compared with the same period in 2008. A similar pattern of growth continued in the first three months of this year with the local trade association SNEP reporting a rise in both physical and digital sales compared with the same period of 2009.

Some doubt over the effectiveness of HADOPI was cast by a study conducted by researchers at the University of Rennes which found that illegal downloading has grown by 3%. The study also found that of the 2,000 Internet users surveyed in Brittany, 5% had stopped file sharing, but 10% had switched from P2P to alternative methods of illegal downloading. The IFPI dismissed the study this as “nonsense” as it was conducted before any warning letters had been sent out.

The evidence grows
In the cases of France and Sweden, most would agree that it is too early to hail tougher legislation as the music industry’s panacea and 2010 results will probably present more compelling evidence. But there are several more countries that have also seen improvements in sales following a move to more rigorous intellectual property enforcement. IFPI sales figures for South Korea in 2009 and 2008 show large sales increases coinciding with the introduction of tough new laws. While South Korea still has some way to go before it reaches the peak year of 1996, when retail sales totaled Won415.6 billion, last year’s sales figure of Won364.3 billion is a significant move closer.

Some countries have experienced a slowing in the levels of falling sales with no new national legislation. For example, Germany has consistently stated that it would not impose any graduated response system to combat file sharing. But German rights holders do have some recourse to protect their intellectual property. To begin with a warning letter is sent to an Internet user identified as infringing copyright. The offender is invited to sign a cease & desist letter and to pay compensation. If there is no agreement on a settlement, the issue is then taken to court. Is it a coincidence that the decline in the trade value of recorded music sales in Germany has slowed at the same time local rights holders have been sending out warning letters? It would appear not. The German trade association the BVMI has recently presented details of a study on the level of file sharing in Germany, which shows it declined last year.

Unpopular in some circles as this may be, there is growing evidence that legislation is having an effect on the attitudes of file sharers. New examples are emerging that illustrate an improvement in music sales following the introduction of tougher measures to control copyright infringement. Although some countries are closing in on the point where sales can’t fall anymore and growing investment in new digital services is leading to increased user interest, it would appear that legislation is the answer, in the short term at least. Do you agree?

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.

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