Global recording industry optimistic despite revenue fall

[March 19, 2014]  By Michael Roddy

LONDON (Reuters) — Top executives of the global recorded music industry said on Tuesday they were optimistic about growth despite figures for 2013 showing an almost 4 percent annual decline in revenues to $15 billion, blamed largely on the Japanese market.

The drop-off followed figures in 2012 which showed the industry, hard hit by illegal downloads and music piracy, registering its first revenue gains since 1999, to $16.5 billion.

In its latest annual report, the London-based industry federation IFPI said most of the decline in 2013 was due to a 16.7 percent revenue slump in Japan, which is making a belated transition away from physical products like CDs to digital delivery via the latest technology.

Excluding Japan, global revenues fell by 0.1 percent, the report said.

"There can be bumps in the future, no question, but it doesn't take anything away from the general direction the music industry is heading which is more digital, more services, more consumer choice and more consumer satisfaction with the services offered and probably more consumption," Edgar Berger, president and CEO, International, of Sony Music Entertainment, said at a news conference.

"So I personally believe it's going to be an absolutely growing business," Berger said.

Max Hole, chairman and chief executive officer of the international division of Universal Music Group, said the numbers were even more impressive given the deep hole the industry was in at the beginning of the last decade.

"You've clearly got evidence there are now music services that absolutely the consumer is engaging with," he said.

The IFPI said that among the encouraging trends was a sharp uptick in revenues for subscription services.

"The digital market has continued to diversify with revenues from subscription services, such as Deezer and Spotify, growing by 51.3 percent, passing the $1 billion mark for the first time," the IFPI said.

"Global revenues from subscription and advertising-supported streams now account for 27 percent of digital revenues, up from 14 percent in 2011."

It also said Europe had registered overall growth for the first time in 13 years, revenues were stable in the United States and sales were up in Latin America.

"Even accounting for the difficult situation in Japan, the global recording industry is in a positive phase of its development," IFPI chief executive Frances Moore said in a statement.

"Revenues in most major markets have returned to growth. Streaming and subscription services are thriving. Consumers have a wider choice than ever before between different models and services.

"And digital music is moving into a clearly identifiable new phase as record companies, having licensed services across the world, now start to tap the enormous potential of emerging markets."

PIRACY REMAINS MAJOR CONCERN

But Moore said piracy remained a serious problem, with surveys showing that as many as one in four Internet users download pirated material.

"This is despite that fact that our own research shows 50 percent of the people using infringing services know there are paying services," she said, saying there needed to be even more efforts to crack down on content that is available illegally.

The IFPI reported strong revenue growth from performance rights coming from broadcast, Internet radio services and performance venues.

"Performance rights income to record companies crossed the $1 billion threshold for the first time in 2013 to hit $1.1 billion," it said.

"This was an increase of 19 percent, more than double the growth rate in 2012, accounting for 7.4 percent of total record industry revenue."

(Editing by Stephen Powell)

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