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Music Piracy Falls in 2011, But Revenue Also Drops, As Digital Distribution Grows

Posted by: , 19:26 EST, Tue January 24, 2012

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Despite a possible 46% drop in the number of music pirates compared to a year ago thanks to the shut down of LimeWire, the music industry still recorded a 3% decline in revenue

When the music industry recorded a huge victory in their war against piracy, by shutting down music sharing service LimeWire, last year, and with stats showing a dramatic decline in web piracy, the natural conclusion would seem to be that revenue would increase as a result. But figures just released by the International Federation of the Phonographic Industry (IFPI) showed that the industry is still on the decline.

Following the closure of LimeWire in October 2010, music piracy rates declined dramatically according to figures released by NPD, a research firm. The firm noted, three month after the closure of LimeWire, that there were 12 million less music pirates in the US alone, down from 28 milllion (a dramatic decline of 46%). With each pirate downloading on average 18 songs in just 3 month, it could mean a total of 864 million less illegal song downloads every year in the US alone.

Another research firm, commissioned to do research on web piracy by NBC Universal, also found that music piracy was no longer the dominant form of piracy on the Internet. Envisional found that only 2.9% of all people downloading on BitTorrent based file sharing networks were downloading music, compared to 14.5% for TV shows, and 35.8% for porn.

But the latest IFPI report showed that, while the decline in music sales slowed compared to 2010, global music revenue still dropped by $500 million, or 3%, compared to a year ago, when LimeWire was still the most dominant tool for music piracy (used by 56% of those downloading illegal music, according to the NPD).

While the music industry has solely blamed pirates for their woes, others say that the decline in album sales, which accounted for over 90% of all music revenue ten years ago, has been the real reason behind the music industry's decline, as consumers move away from more expensive CD albums, towards cheaper digital tracks. The above average revenue figures in the 90's, from people upgrading vinyl albums to CDs, may have also inflated the industry's expectations - in comparison, the move to digital meant that most people didn't have to re-buy their albums, as they could simply "rip" the digital track from CDs.

And proving that the shift to digital is still happening, digital music revenue actually rose 8% in 2011. More promising for the industry was that digital album sales rose by 24%, helping to slow down the revenue decline seen in the last few years, and perhaps shift the industry into growth next year.


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