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IFPI Digital Music Report 2008

IFPI Digital Music Report 2008

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Published by: edpeto on Feb 20, 2008
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IFPI DigitalMusic Report2008
RevolutionInnovationResponsibility
 
Contents
Page:03 Introduction:Making ISP Responsibility a Reality in 200804 Section 1:Revolution and Innovation – The Digital Market in 200710 Section 2: A New Deal or Consumers14 Section 3:The Explosion o Channels, Formats and Business Models18 Section 4:Copyright Thet: The Impact and the Response21 Section 5:Time or Governments and ISPs to Take Responsibility23 Section 6Creating Value in the Digital Sector25 Section 7:The Hidden Dangers o Illegal Downloading26 Section 8:Promoting the Value o Music
page 02
 
Introduction:Making ISP Responsibilitya Reality in 2008
In 2007 ISP responsibility started to become an accepted principleIn 2008 it must become a realityBy John Kennedy, Chairman and CEO
 An incredible revolution is sweeping the musicindustry and in the pages o this report you willread how record companies are adapting theirbusiness to the dramatic changes broughtabout by the digital age. In the US, only veyears ater the commercial music downloadbusiness rst emerged, 30 per cent o allrecorded music sold is online or mobile.Record labels are becoming broad-basedentertainment companies, developing newrevenue streams. The consumer has betterchoice, availability and fexibility in enjoyingmusic than ever beore.Our digital revenues are growing and diversiyingas our business model changes rom onedominant ormat to hundreds o channelsand products. Yet behind the innovation, experimentation anddiversication o the digital music market in 2007,another change has happened – o possibly evengreater importance to the long term uture o ourbusiness. The last year has nally seen the windo change blowing through old assumptionsabout the role internet service providers (ISPs)should play in protecting copyrighted content.ISP responsibility is becoming an accepted idea.This is a critical development, because untilnow ISPs have played no such role. Copyrightthet has been allowed to run rampant on theirnetworks under the guise o technologicaladvancement. Some estimates say no lessthan 80 per cent o all internet trac comprisescopyright-inringing les on peer-to-peer (P2P)networks. ISPs have largely stood by, allowing amassive devaluation o copyrighted music. Thisin turn – and despite all the positives about ourdigital growth – has prompted a crisis in recordedmusic that has wide implications or the wholedigital market place and all those businessesto whom music is an important ingredient.Today, however, a sea-change is happening.The whole music sector, governments andeven some ISPs themselves are beginning toaccept that the carriers o digital content mustplay a responsible role in curbing the systemicpiracy that is threatening the uture o all digitalcommerce. Ater years o discussing anddebating, I am convinced it is no longer aquestion o whether the ISPs act – thequestion is when and how.More than anyone else in 2007, our industryhas to thank French President Nicolas Sarkozyand the Chairman o FNAC Denis Olivennes orthe change o mood. The Sarkozy Agreement,announced in November, is the most signicantmilestone yet in the task o curbing piracy on theinternet. It sets up a groundbreaking three-waypartnership between the creative sector, ISPs andgovernment. It takes the protection o intellectualproperty online into new territory, requiring ISPsto disconnect copyright inringers on a large-scale, using an automated system and totest ltering technologies.Not every detail o the French plan will beexportable to other countries but the overridingprinciple behind the plan – the undamental rolethat ISPs play in stopping piracy – sets an excitingexample internationally. President Sarkozysummed it up: the internet must not be allowedto become a Wild West; it must be a mediumwhere we protect our culture.There has been progress elsewhere too. Anextremely important court decision came in theorm o the Sabam-Tiscali judgment in Belgium inJune. The court not only conrmed that the ISPmust take responsibility or curbing inringementon its networks – it reerred to no ewer than sixpossible technological solutions or blockingthe trac o unlicensed music.Similar movements have happened in dierentparts o the world: new legislation engagingISPs in Taiwan and Korea; a hard-hitting messagerom the Swedish government’s Renors Report;and intensiying intra-industry discussions inother countries. In the UK, with talks proceedingagainst the ticking clock o the government-commissioned Gowers Review, ISPs need toprove that they can deliver action that will havea real impact on piracy. In the US, AT&T hasshown cautious leadership, acknowledgingISPs’ responsibility to protect content andworking on ltering technologies with themusic and lm industries.
Introduction: Making ISP responsibility a reality in 2008page 03
O course, one key reason or this apparentsea-change is the commercial sel-interest oISPs. Unlicensed trac has always been hoggingtheir bandwidth, but now, as ISPs get urtherinvested into the business o digital content,it poses an increasing danger to theiruture revenues. A turning tide o opinion is one thing – a concreteprogramme o action is another. There is onlyone acceptable moment or ISPs to start takingresponsibility or protecting content – and thatmoment is now. Ater years o prevarication in thisdiscussion, the French government’s decision to“seize the day” is deeply rereshing. It shows anurgency o approach that is badly needed inevery market where music is today beingmassively devalued by piracy.In Europe, we look to the European Unionto capitalise on the momentum created bythe Sarkozy Agreement. The moment or EUlegislation to be drawn up has already arrived.There must be obligations on the ISPs to warn,suspend and eventually disconnect inringingusers and to apply ltering measures. This shouldbe achieved by agreements, backed by legislationwhere necessary. At the same time, we as anindustry will not be shy to use legal action to orceISPs to act when dialogue ails but I would like tothink that they now understand that meaningulvoluntary action is a more attractive option thancoercion – we have always advocated that!This report refects revolution and innovationin the music business. Music is more advancedalong the digital road than almost any othercontent business. As the table on page sixrefects, we have transormed our landscapein the last ve years. I am hopeul that in 2008the online subscriptions business, hithertoheld back by a range o problems, will nallyrealise its huge potential as a revenue stream.Revolution and innovation, however, are notgoing to be enough to secure a healthy utureor the music industry. The third corner o thetriangle is responsibility. 2007 was the year ISPresponsibility started to become an acceptedprinciple. 2008 must be the year it becomesa reality.

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