Just An Online Minute... Music Sales Outlook Gloomy Despite 40% Digital Growth

by Wendy Davis, Jan 24, 2008, 2:00 PM

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Here's the good news: Digital sales of music grew to $2.9 billion globally last year, marking a 40% increase from 2006.

But here's the bad news: Music sales overall still dwindled to $17.6 billion, a drop of 10%, as the digital growth wasn't enough to offset lost revenue from plummeting CD sales, according to a new report by the International Federation of the Phonographic Industry. The report comes just several weeks after Nielsen SoundScan also reported that sales of physical albums plunged 15% last year.

Again, the music industry is blaming piracy for the declining revenue and renewing calls for Internet service providers to start filtering out copyrighted material.

As with its 20,000-some lawsuits against alleged file-sharers, the industry's calls for filtering mark another attempt to muscle its way back to controlling distribution. And, as with its litigation strategy, this tactic isn't going to work.

Filters that rely on digital fingerprinting to block copyrighted material have many flaws -- not least of which is that people can get around them by encrypting the files. Yes, encryption might lead to the creation of more sophisticated filters. But that, in turn, will lead to yet better work-arounds.

Rather than call on ISPs to police the Web, the music industry would do better to focus its efforts on figuring out how to make a profit without battling -- and alienating -- fans.

One simple alternative is to make it easier for people to purchase high-quality tracks online. Consider, Nine Inch Nails frontman Trent Reznor recently told CNET why he ends up "stealing" music: "Usually because I can't get it easily somewhere else or the version I can get is an inferior one with DRM, perhaps, or I have to drive across town to get it to then put it on my computer or it's already out on the Internet and I can't pay for it yet."

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