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The recorded music industry
is reinventingitsel and its business models. Our world in2009 looks undamentally dierent rom howit looked ve years ago. Record companieshave changed their whole approach to doingbusiness, reshaped their operations andresponded to the dramatic transormation inthe way music is distributed and consumed. The music business, like others, goesinto 2009 under the uncertain cloud o the global economic downturn. However,we are no stranger to the need toreorm, restructure and reinvent. Recordcompanies began this process manyyears ago. They are, I believe, as a result,better placed than many other sectors tomanage through more dicult times. There are some very positive stories inthis report about innovation and changeinside today’s music business. First, recordcompanies are building an economic uturebased not just on selling music but on“monetising” consumer access to it. Nokia’sComes With Music service, launched inOctober 2008, embodies that concept, withmusic ree and unlimited, bundled into thecost o a mobile phone. So do the newlink-ups between music companies and ISPs,rom Sky in the UK to TDC in Denmark andother European ISPs. These are just tasterso the enormous potential or licensing andgenerating commercial value rom music atevery point where the consumer is likely towant it. Meanwhile, as this report goes topress Apple announced it had signed dealswith leading record companies to oer eightmillion DRM-ree tracks at fexible price points.Increasingly our partners in these ventures,grappling with consumer demand problemso their own, are seeing the opportunity o adding music to the value o their oering.One impressive statistic in this report is theconrmation by Danish telecoms company TDC that its music service has produceda very signicant and measureable impactin retaining its broadband and mobilephone customers. That is a powerultestimony to the commercial value o music and it will strike a chord amongISPs and mobile operators elsewhere. The second dominant theme o this reportis the part that record companies – alsoreerred to in this report as “music” companiesto refect their expanding role – continue toplay in bringing to market the vast majorityo acts that music ans enjoy. The idea thatthe digital world somehow diminishes theimportance o music companies is simplya myth. On the contrary, in a world where amultitude o aspiring artists are competingor visibility among millions o consumers,the music company role can only becomemore important in the digital uture. Theinvestment, skills, services and creativeadvice that labels provide remain as corea unction o the music business as ever.Finally, there is a momentous debate goingon about the environment on which ourbusiness, and all the people working in it,depends. This is a debate about the uturenot just o music but o all creative industriesin a digital era where the very principle o getting rewarded or creative work is at risk. The vast growth o unlawul le-sharingquite simply threatens to put the wholemusic sector out o business. This reportrefects the wide consensus, rom majorand independent record companiesto managers and politicians, that anew approach is needed to protectcopyright – one that involves sharingresponsibility across the value chain. The debate has a huge way to go, but thecampaign or ISPs to act as proper partners inhelping protect intellectual property is makingprogress. Governments are beginning tounderstand the scale o the challenge o tryingto monetise content in an environment wherearound 95 per cent o all music is downloadedwithout payment to artists or producers.France is leading the drive towards ISPcooperation, understanding that it is the utureo French creative industries that are at stake. The UK and a growing number o countrieshave progressed along a similar route in 2008and momentum will build urther in 2009. This report tells the story o the musicbusiness as it is developing today. Music is theengine and heart o a large number o diversebusinesses and demand or the product isgrowing year-by-year. Music companies arechanging their business models and reningtheir skills in bringing artists to an ever morecomplex and sophisticated marketplace.Governments are beginning to acceptthat, in the debate over “ree content” andengaging ISPs in protecting intellectualproperty rights, doing nothing is not anoption i there is to be a uture or commercialdigital content. The big question or 2009 –with the ocus in particular on France andthe UK - is what real action will result andhow quick and how eective it will be inreversing the devaluation o recorded musicand helping return the industry to growth.
“Governments are beginning toaccept that, in the debate over‘free content’ and engagingISPs in protecting intellectualproperty rights, ‘doing nothing’is not an option.”
John Kennedy, Chairmanand Chief Executive of IFPI