Unlicensed file sharing services are widely blamed for declining sales of CDs and the sluggish growth of legitimate download services (see
Online Music Market Growing Slowly). A recent report from Informa Media Group claimed that combined revenues from digital downloads and subscription services will reach $1.8 billion in 2008 (see
Unknown Downloaders Threaten Online Music Ambitions). However, ‘illegal’ free downloading is yet to reach its zenith and music companies could be fighting a losing battle in attempting to enforce copyright laws and establish paid online services.
In its paper, Thinking Outside the Disc, Parks Associates calls on the record industry to combat digital piracy by introducing a free music-on-demand service that relies on advertising revenues. This is seen as a more realistic solution than pursuing legal actions which ignore current realities.
“Digital music has changed the market, and business models need to change too or the industry will suffer the consequences,” said John Barrett, research analyst at Parks Associates. “Even if file-swapping networks were to magically disappear, the traditional revenue models would still be under strain.”
He points out that record companies have traditionally been able to sell the same piece of music several times as consumers have upgraded to new and improved systems. Digital technology negates this process and the music business has to accept that the days of hard formats may be numbered.
