Digital sales market, rapid growth

Digital set to drive business within two years

Source: Music Week

Digital music sales will drive overall growth in the global music market within two years, according to the IFPI's director of market research.

Figures released today by the IFPI show that digital music sales nearly tripled in value to $1.1bn (£634m) in 2005 as the total number of single tracks downloaded increased from 160m to 470m.

Although total sales of recorded music fell by 3% to $21bn (£12bn) in trade revenues on the back of a declining physical market, IFPI director of market research Keith Jopling says that he expects the global music market to be back in the black within two years.

"We would expect digital to be driving overall industry growth within the next couple of years," he says. "It is the markets that have performed pretty well in the digital space that have relatively well overall. That makes sense - it is the digital industry that is making growth."

He adds that in certain markets, such as Japan where music sales increased 1% in 2005, a strong digital market is already driving overall growth.

The IFPI figures, which for the first time officially include global digital music sales, reveal that digital sales are split roughly 50:50 between online and mobile. However, there are big regional differences: in Japan and parts of Europe mobile dominates the digital music market, while online sales are stronger in markets such as the US, the UK and Germany.

Master ringtones are currently the largest segment of the mobile music market, accounting for 87% of sales. However, new formats such as full track downloads to mobile and music videos grew faster in 2005 (180% increase in trade revenues) than master ringtones (120%). In the online market a-la-carte sales, led by iTunes, continue to dominate, accounting for 86% of sales.

In the UK, where digital accounts for 3% of music sales, the music market declined 3% overall to £1.19bn (trade revenues). Total US sales also fell 3%, to $7bn (£4bn)(trade revenues), after an 8.9% decline in physical sales.

In general, the major European markets held up well, with declines in physical sales offset by a booming digital sector. Sales in Germany, the world's fourth biggest music market, remained stable at $1.46bn (£840m). In France, sales fell by 2% to $1.25bn (£720m).

Buoyed by the digital market, singles sales increased by more than 75% globally in 2005. Singles have now become predominantly a digital format with digital singles accounting for 75% of sales, compared to 45% in 2004.

Globally, sales of physical formats fell by 6.7% in value and 8% in units. CD album sales were down 6% in value and 3.4% in units, DVD music video dropped by 4.3% in value but remained flat in unit terms.

IFPI chairman and CEO John Kennedy says, "The global music market is fast becoming a mixed economy in the way fans and consumers are buying their music. It is encouraging that the markets with the strongest digital sales are also generally the best performing markets overall. In Japan digital has already made up for the decline in physical sales and other markets should go this way."

"In 2006 we expect to see continued growth online and more innovative mobile services attracting music fans into the legal digital market," he adds.

Coldplay's X&Y (Parlophone) was 2005's biggest selling album, with sales of more than 8m units, followed by Mariah Carey's The Emancipation of Mimi (Universal) and 50 Cent's The Massacre (Universal).

This is the second time that Coldplay have appeared in the top 10 since IFPI began publishing the list in 2001, with the band's second album A Rush Of Blood To The Head having been the sixth biggest album of 2003.

EMI Music chairman and CEO Alain Levy says, "This is a huge achievement for Coldplay. They have developed long-term global success over the course of a number of albums, and I'm sure that they will continue to build their career for many years to come."