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Culture Documents
Britain is a digital music nation. But where is all this digital music
coming from? For the first time, this
Wherever you look, people are report provides a comprehensive
listening to music on their mp3 picture of the digital music nation
players; millions of us every at play.
day are watching music videos Over the last five years, the legal These achievements are dwarfed,
on YouTube or checking out digital music market has been an online however, by the continued widespread
innovation success story. Digital now availability and use of illegal services
the latest releases on Spotify. represents a quarter of record label and the ongoing challenge of digital
The internet is an incredible revenues, driven by partnerships with piracy on a huge scale. During 2010,
new retailers, existing key brands and three quarters of all music tracks
technology for communication, major internet players alike. There are digitally acquired in the UK were
and one of the things we use now 67 legal digital music services downloaded illegally – that’s two full
it for most is to listen to, share operating in the UK, offering a vast albums for every man, woman and
choice of new songs and catalogue child in the country. Despite the high
and talk about music. that can be browsed, streamed or awareness achieved by legal services
bought online. like Spotify, last.fm and we7, more
people continue to use illegal P2P.
Many music fans have enthusiastically
embraced these services. Since 2004, Unfortunately, the enormous scale
more than 500 million single tracks of the piracy problem shows no signs
have been bought legally from digital of abating. Almost eight million people
retailers in the UK. Digital albums in the UK continue to download music
have also proved themselves a hugely illegally according to research presented
successful format, passing the 50 in this report. Although P2P use has
million sales mark much faster than remained stable, the number of people
the CD and now accounting for almost using hosting sites and other illegal
20% of all albums sold. sources continues to rise dramatically.
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Despite the widespread availability The economic stakes are high. The If we work now towards that internet
of legal services, they’re having a creative industries employ nearly two – through proportionate, education-led
negligible impact on overall levels million people in the UK, and are measures such as those passed by
of illegal downloading. recognised as a key engine of growth Parliament in the Digital Economy Act
in the new economy. But digital piracy – not only do we give our music the
The internet plays an enormous role is putting many thousands of jobs chance to flourish, but we will spur on
in our society. It has become central under threat and is holding back digital innovation and investment. If we
to how we work and shop, learn and innovation and investment in the falter and lack the courage to act, we
entertain ourselves, as well as creating new sector of digital content services. risk creating a serious cultural deficit
a new social space connecting us Unless decisive action is taken quickly in the UK. The voices of a generation
together. But we should pause to think to create a properly functioning of new bands and artists simply won’t
about whether the frenetic pace of marketplace for digital entertainment, get signed and won’t be heard. We
technological innovation online is in the UK cannot expect to remain a will have abandoned values that
danger of trampling on basic ethical major global creative hub. matter. As a country, and as human
values we rightly cherish elsewhere – beings, we will be the poorer for it.
that stealing is wrong; that creativity is This wouldn’t be good news for British
positive and deserves to be rewarded; consumers. They have every right to
that our culture defines who we are, expect that the internet should be a
and should be protected. place where, if they are browsing for
music or other content, they generally
This challenge is playing out right encounter legal content which is
across the creative industries. high quality, virus-free and is what
Newspapers are introducing conditional it purports to be. As our report
access or ‘paywalls’, having recognised Geoff Taylor
shows, this is far from the case Chief Executive, BPI
that not all information can be free now. Consumers paying to access
of charge if investment in quality entertainment also have a right to
journalism is to be maintained. expect that this will help to pay for
new content for them to enjoy.
Online book piracy is already damaging
the fledgling market in e-publishing.
And the illegal streaming of movies/TV
and sports online harms the funding of
new productions and reduces the value
of sports rights.
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152,700,000 – sales of singles 17 (out of 20) – average number of 54% – proportion of internet users
in 2009, 98% of which were digital* links to illegal sites in first two pages who believe that websites offering
of Google results, when searching music illegally should be banned
for UK Top 20 singles*** or blocked from the internet**†
500,000,000 – digital singles
sold to date in the UK by Sept 2010*
94% – awareness amongst internet 76% – illegal proportion of all music
users of legal music download stores** tracks obtained during 2010***
50,000,000 – digital albums
sold to date in UK by Sept 2010*
28.8% – proportion of UK online 6,100,000 – people using
sources of illegal content in
1,200,000,000 – single music population (age 16-54) involved in
September 2010 alone****
tracks illegally downloaded in 2010 illegal downloading**
from unauthorised sources**
23% – proportion of UK online +7% – net increase in P2P use
during last 6 months**
£280.5m – retail value of digital population (age 16-54) using P2P
music market in 2009, 20% of overall sites and software to obtain
£1.4bn recorded music market*** unauthorised music** +15% – net increase in cyberlocker
use during last 6 months**
£984,000,000 – retail value 13% – proportion of UK online
of single tracks downloaded in 2010 population (age 16-54) using 79% – users who had encountered
from unauthorised sources***†† cyberlocker links via blogs to problems as a result of acquiring
obtain unauthorised music** music from a P2P network**
67 – legal digital services in the UK,
more than any other country*** Sources:
7,700,000 – UK internet users * OCC
engaged in illegal downloading
** Harris Interactive
82p – average retail price of single across all sources**
*** BPI
digital track*
**** UKOM/Nielsen
55% – proportion of internet users † Excludes ‘Not sure’ responses
13,000,000 – individual tracks who believe the Government should take †† Recording industry losses from foregone
available for licence to legal action against persistent downloaders spend are estimated by Jupiter Research
digital services*** who had been previously warned**† at £219m for 2010
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This extraordinary growth has been some digital music in the past year from every genre and suited to every
reflected in the amount spent by with expenditure skewed towards pocket, with several free at the point of
consumers. In 2004 the nascent men who account for two thirds of access. The music industry’s Music
market was worth around £5m – in every pound spent. Matters initiative shows consumers
2009, the retail value of the digital how to find a wide range of legal
music market grew by 43% to reach digital music services.
Building New Relationships
£280.5m, accounting for more than 20%
of the £1.4bn recorded music market. Compared with just five years ago, the This ubiquity has only been achieved
marketplace is unrecognisable: while because music companies have
The reality is that downloadable music the early success of digital was solidly invested heavily in forging new
has now cemented its place in the founded on ‘a la carte’ stores (as business relationships with a wide
mainstream, accounting for over typified by iTunes), now the models range of new partners. These
99% of sales in the singles market. are manifold, from streaming and partnerships, with some of the most
According to consumer research from subscription to freemium and ‘The iconic and forward-thinking brands of
Kantar, 20% of the UK population aged Cloud’. There are now nearly 70 the day, have ensured that music is
12+ (almost 10m individuals) bought services legally offering music legally accessible in more ways and
places than ever thought imaginable.
DIGITAL’S SHARE OF SALES
100%
Apple have, of course, helped
99.0% popularise the concept of legally
95.8% 98.0%
purchasing digital music online, with
90.1% other partners such as Amazon helping
80%
79.3% further acclimatise and introduce
music fans to the process. Forward-
60% thinking Internet Service Providers
have worked extensively with record
55.1%
companies and artists to try and work
40% out new ways to bring music to their
customer base, while brand leaders
such as Nokia and Sony Ericsson
19.6% 20%
12.5% have been instrumental in bringing
17.9% 7.7% digital music to mobile audiences.
1.8% 4.5%
0%
2004 2005 2006 2007 2008 2009 Q1-3 2010
Source: OCC 5
Singles Albums
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While these connections have helped break important new commercial ground, Legal Sites and
there is a lot of scope for new commercial partnerships to leverage the power Services Explained
of music to attract and retain an audience. In particular, there remains great
– and very lucrative – potential for ISPs and search engines to deliver music A La Carte
as an added-value service to their users. Indeed, any business with a large Apple’s iTunes is probably the brand
consumer base – such as supermarkets, online retailers, sports/leisure most associated with this model, which
brands, broadcasters and newspapers – could offer their customers digital allows ‘cherry picking’ of isolated tracks
services and benefit from both music’s enduring popularity and credibility. as well as purchasing albums in their
entirety: over 10 billion tracks have been
Music companies have shown themselves to be willing and ready to go far downloaded around the world from
beyond their traditional models and circle of partners to bring about credible the store since its launch. Competition
and accessible legal music offers in the digital age. The following section has grown considerably over the years,
looks at some of the different services currently in operation in the UK. however, with major retailers such as
Amazon, Play.com, Tesco and HMV
all operating in the UK.
The average price of a track is
currently 82p (data from OCC), but in
practice the music download market
is highly competitive as consumers
benefit from large numbers of
promotions. Many legal sites are
offering tracks by new artists for free
and popular singles can be on sale for
as little as 29p. Likewise, albums can
be promoted at very appealing prices –
Take That’s Progress was available,
for example, for £3.99 in its week of
release, as were all the shortlisted
albums for the Mercury Music Prize in
the week of their nomination. What’s
more, this information is all readily to
hand – customers can easily find the
HMV Digital best deals by using online comparison
tools such as Tunechecker and
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Compare Download.
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mobile devices.
Many other sites allow visitors to legally stream music in either audio or video
formats. MySpace, MSN Music and mflow have all either launched or re-launched
in the past year, while YouTube and Muzu both house all manner of authorised
music video content. Console gamers can even access the latter now with the
advent of the Vidzone service on the Sony PlayStation 3 – over 200m music
videos have been streamed since its launch in 2009.
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Subscription Accessing personal media collections This is just one of many new models
Although we7 and Spotify both now via ‘the cloud’ – i.e. free of the that music companies are beginning
have subscription tiers, two major traditional personal hard drive or to license; new partnerships are
services predate them. Napster was physical formats – is touted by many constantly being forged, all with a
originally an infamous filesharing as the next ‘great leap forward’ (see view to serving the evolving needs
service but was relaunched as a legal page 14 for a more in-depth look). and desires of the UK’s music lovers.
brand in 2003, allowing users (who
subscribed for a monthly fee) to listen
to unlimited advertisement-free music
and purchase it on an a la carte basis.
Its library now boasts more than 10m
tracks, with music from 800,000
artists. Independent music specialist
eMusic originally launched in the UK
with an ‘all you can eat’ subscription
model, but now lets users download
varying numbers of tracks according
to which plan they sign up for (their
entry-level tier is priced at £9.99 per
month and allows 24 downloads).
Music Anywhere
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Digital Revenues digital now accounts for a big slice of Expanding Consumer Choice
Record companies have invested industry revenue – 24.5% (up from
Channel & Repertoire
significant amounts of time and 19.2% a year earlier). This impressive
share of the overall market has been The growth of the legal digital music
money in digitising their catalogues of
driven by innovation above and beyond market has only been made possible
recordings and negotiating licensing
the standard a la carte model. Almost a by providing music fans with an ever-
deals with legitimate online music
fifth of digital income now comes from growing choice of catalogue, through a
services. This investment is now
a mixture of subscription services comprehensive range of access points.
beginning to reap meaningful results.
(Napster, eMusic etc), ad-supported The services on offer are evolving
Although rising levels of income from
(Spotify, we7, etc), music video constantly too, with many mixing
digital music have not yet offset the
downloads and ‘other’, which includes and matching features to better meet
decline in revenues from falling CD
customer demand. Music on mobile,
sales, BPI figures for the 12 months ringtones, ringback tunes and other
for instance, is now not only served by
ending in September 2010 show that one-off or ad-hoc payments.
pure a la carte and streaming models,
it also houses services such as Nokia’s
BREAKDOWN OF DIGITAL REVENUES Ovi Music Unlimited, which bundles
12m ended September 2010 in unlimited downloading into the
price of a handset.
Other 0.9%
Ad-supported 4.8% Services such as Napster are offering
Subscriptions 6.2% a new spin on the streaming model,
Mobile 4.6%
with credits for downloads (to keep)
Music Video 1.3%
included in the monthly subscription
fee, while the Nectar Music Store
allows members to purchase music
from credits accrued from their
supermarket shopping. Many other
online stores are also experimenting
with new features, with some – such
Albums Tracks & Single as Bleep.com – giving immediately
36.5% Bundles 45.7% redeemable download codes when
customers order a CD online.
Source: BPI
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There are almost 70 services in the UK that provide streaming or downloadable multi-label content legally in the UK.
Here we focus on two of them:
Fairsharemusic
Fairsharemusic.com offers a unique take on the Fairsharemusic currently has eleven registered
concept of the music download store. Users can charities it donates to, including the NSPCC,
browse over 11 million tracks – including new WWF, Centrepoint, Amnesty International,
release and exclusive content – and download Oxfam, British Heart Foundation, British Red
high quality MP3s straight into their existing Cross, Friends of the Earth, Great Ormond
iTunes or Windows library. The difference is Street Hospital, Sue Ryder Care and the
that for every track they download, the site Teenage Cancer Trust with five more charities
guarantees to donate half the profit from the to be announced by the end of the year.
sale to charity.
The site’s philosophy is evidently appealing to
greater and greater numbers of music fans,
with customer numbers doubling month on
month since its launch in June 2010. It has
since had over 50,000 visitors from more
than 140 countries and over half of those who
register with the site make a purchase on their
first visit. According to the site’s founders,
customers are spending almost double the
estimated industry average on each visit and
more than a third of customers are returning
visitors coming back more than once.
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Spotify
Spotify launched in the UK in October 2008 Piracy continues to be the music industry's
with the aim of offering a powerful music biggest challenge. Look at it this way – in the
experience within a 100% legal framework. physical world, an enormous supermarket
We’ve built up a catalogue of more than 10 giving entertainment away illegally and for
million tracks from both major and independent free would be a serious deterrent to setting
labels, and combined this library with a service up and running a shop where you charge
that makes it easier than ever before to search for the same products.
for and share music.
Online, we continue to face a comparable
The success of Spotify in the UK has been challenge where our ability to convert people
driven by the 'freemium' business model. Users to paying for music subscriptions, or attract
can register either for free accounts supported advertising for our service, will be challenged
by adverts, or upgrade to paid subscriptions by the continued availability of that same
without ads and with a range of extra features music on illegal services.
such as portability, higher quality streams and
offline music access. Our users tell us the Spotify has invested in and developed a service
biggest reason they subscribe to Spotify is to that people are moving to in their millions, and
take their music with them, which is possible is playing an increasingly important role in
on a range of mobile devices. attracting people away from filesharing and
illegal streaming. As ever, a level, legal playing
It's fantastic to see so many people in the UK field remains vital for any business looking
enjoying Spotify. As we continue to establish to flourish in the digital age.
the service, we're also proving to be a major
source of digital revenues for artists and labels. Daniel Ek
Spotify co-founder and CEO
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The range of music available on legal Number of Legal Music Services speeds were slower and computer
services has expanded in tandem as by Territory hard drives and the capacity of digital
they have flourished. Figures from (multi-label content, September 2010) music players were much smaller.
OCC show that the number of different UK 67 Whilst the sound quality of files
tracks downloaded each week in the delivered at this speed was acceptable
UK has grown by almost four times in Germany 42 to most listeners, today bit rates of
just five years while Spotify now offers Spain 29 256kbps or 320kbps are commonplace
users a choice of over 10 million tracks (for downloads and streaming services
France 27
and adds around 10,000 every day. such as Spotify Premium), resulting in
Italy 27 much improved audio quality. Faster
The announcement in mid-November
Source: BPI/IFPI broadband speeds, cheaper hard
that The Beatles’ catalogue was to be
drives and digital music players with
made available on iTunes has meant
Innovative deals have helped to grow larger capacities have all combined
that one of the last few pieces of the
the legal digital offer, but the effect of to greatly enhance the digital music
digital repertoire jigsaw has fallen
piracy is without doubt undermining the experience for fans.
into place. Very few artists are still
potential for expansion in this sector. All
inaccessible via legal download
of these legal businesses are working For most consumers, a 256 or
services, with the catalogues of
hard to compete against services that 320kbps MP3 file provides a completely
major artists such as Metallica, Led
have little or no regard for the concept satisfactory listening experience via
Zeppelin and Pink Floyd all present
of copyright and do not remunerate streaming and will also download in a
after some periods of unavailability.
anyone in the creative chain. relatively short time. However, as in-
The UK has moved particularly fast in home technology becomes increasingly
making a wide choice of legal sources Sound Quality sophisticated and ever more affordable,
of music available, as the comparison As well as vast consumer choice in music lovers are beginning to discover
table above illustrates. Across terms of catalogue and a growing retail and appreciate the benefits of even
streaming, a la carte, subscription, base, today’s music downloader can higher quality downloads.
bundled and mobile channels there are also often choose to buy music which
currently almost 70 recognised services arrives with premium sound quality. Sites such as Bleep.com, Linn Records
providing multi-label content legally, and Theclassicalshop.net are meeting
more than in all the other leading Kbps (kilobit per second) is a measure the growing demand from the ‘audiophile’
European territories. By comparison, of bit rate, or the speed at which data market who want the very best in
for the USA – the biggest per capita is transferred. In the early days of sound quality. In addition to 320kbps
consumer of digital music – IFPI’s legitimate music downloading 128kbps MP3 downloads, other high quality
Pro-Music website lists 20 services. was the norm; internet connection lossless formats are also available.
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Although considerably larger than FLAC (Free Lossless Audio Codec), all
standard MP3s, these enable the file of which give the listener outstanding
to be compressed without losing any levels of audio reproduction. At the
sound quality – i.e. the same as CD, very top end of the scale are studio
but without taking up the same master quality downloads which offer
amount of disk space as a straight the same listening experience as
transfer. There are several types of Super Audio CD (SACD), a high
lossless formats, such as Microsoft’s resolution CD format which offers
WMA (Windows Media Audio) and the highest quality available.
Linn Records
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Music – At the Heart Labels are making sure that they are
of Digital Media represented on a variety of digital
platforms. As well as the requisite
The popularity of music has never website, app and Twitter presence,
been higher and this is reflected in many are reaching out to thousands of
the number of emerging services and fans with dedicated YouTube channels
technologies that place musical content and podcasts (such as Drum & Bass
at their heart. Many of the biggest pioneers Hospital Records, who
selling games of recent years, such as recently reached the 100th episode of
Singstar, Rock Band and Guitar Hero, their award-winning podcast). Artists
are based around interaction with and labels are also looking at the
officially licensed songs, with stores possibilities offered by webcasting
accessible through the gamer’s own performances, such as U2’s gig at the
console meaning that new content is Pasadena Rose Bowl in California in
constantly made available. October 2009, which was watched
Music is also central to some of the live by 10m people on YouTube.
best selling apps on mobile. Games Indeed, a 2010 report by analytics firm
such as Tap Tap Revenge (now Sysomos demonstrated that music is
downloaded over 25m times globally) very much at the centre of YouTube’s Guitar Hero 5
are underpinned by the music of success, accounting over 30% of its
superstar acts such as Coldplay, traffic in the period surveyed.
Lady Gaga and Metallica, while
other artists have created innovative,
officially-endorsed apps with a twist
like the autotune-replicating I Am
T-Pain and the remixing tools from
Little Boots and Deadmau5. Song
recognition app Shazam has also
had an impressive take-up, with the
company stating in early 2010 that it
facilitates over a quarter of a million
track purchases a day globally.
14 Shazam Twitter
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Tinie Tempah
Tinie Tempah has been one of the UK's There was also a considerable amount of online
breakthrough artists of 2010, selling well over activity surrounding concerts. On each night of
a million singles and seeing his debut album the Disc-Overy tour Tinie streamed footage live
certified platinum. Having already built a strong from the dressing room, interacting directly with
presence via media such as Twitter, YouTube fans and exclusive content was delivered directly
(nearly 40m views to date) and his blog Milk to audience mobiles via Bluetooth at certain
and 2 Sugars, his is a young audience who gigs. All this digital innovation was recognised
have grown accustomed to interacting with in this year's Digital Music Awards where
– and getting information about – their Tinie was voted Best Newcomer.
favourite artists online.
While projects such as these are hugely
The campaign around his debut album Disc- impressive, they have only been achieved
Overy was centred on this interactivity. One with considerable investment both in terms of
key innovation was the launch of a new format time, expertise and capital. While the cost of
– a unique lanyard featuring a code enabling distribution may have been driven down in the
fans to download the album and access digital age, the shop window is more packed
exclusive content including videos, behind the
than ever and artists, labels and all those
scenes footage, wallpapers and messages
working with them will have to continually
from Tinie himself. The marketing activity
innovate to be noticed.
included a campaign across Facebook, the
official site, Ping and Twitter to make fans
aware of the iTunes Complete My Album
feature, which ensures that those who have
bought the singles do not have to re-purchase
them as part of a download album bundle.
This gave Disc-Overy a very strong digital
share in its first week (31%), with impressive
take-up of the Complete My Album feature.
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Future Developments movies with Apple TV) and Google It is the ‘personalised’ aspect that is
but several companies have already perhaps key here: technically, many
– The Cloud
announced their intentions for this area. streaming services already operate ‘in
Seen by some as the next potential Tesco have made public some details the cloud’. The main differentiator of the
‘game changer’ for digital music, the of their proposed Clubcard-linked new services is that consumers would
concept of ‘the cloud’ is relatively scheme, which would make digital be accessing music from their own
simple. Instead of having music – or copies of all music or film content libraries, making the selection of tracks
indeed any digital media, such as films purchased by customers at their more convenient. Spotify, for example,
and TV shows – stored as individual stores available for remote access. now includes functionality that scans
files on computer hard drives or other a user’s hard drive music collection
personal devices, customers will have Meanwhile, Sony have unveiled their and automatically generates playlists
their content stored on a central locker Music Unlimited service, which will that users can access from their site.
and be able to access it remotely on the stream music to various forms of
move. Consumers would have fewer There are also benefits beyond the
branded hardware in the first instance.
worries about the ‘interoperability’ of realm of the customer experience –
Carphone Warehouse’s Music
files with the cloud service providers already some services are allowing
Anywhere is also an important step
labels to publicly preview their new
making sure the content is universally forward, allowing users to legally
releases and collect digital demo
playable. The spectre of losing personal replicate and access their own
submissions from unsigned artists. As
digital content following a hard drive music collections from any suitable
sites such as MySpace and Facebook
failure would be removed, and storage PC/laptop or mobile device.
gave bands and labels new platforms
capacity of PCs and portable devices
to reach music fans, these new cloud
would cease to be an issue. In addition,
services may well present a whole
the vast improvement in the sound
new raft of opportunities.
quality of remotely delivered music is
making such services a real alternative
to ‘tethered’ listening.
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iTunes, Spotify and other legal services While in some cases there is a small to-peer (P2P) network that surfaced
have been taken up by millions of UK level of technological know-how in 1999, connecting individual internet
music fans. The good news is that they necessary to acquire music illegally users around the world and enabling
are generating meaningful revenues for from the internet, in most instances them to share digital files quickly
labels and artists alike. The bad news it is worryingly straightforward and and easily.
is that they have not solved the problem can be as simple as typing the name of
of endemic illegal downloading of the track or artist into a search engine. Since those early days, the methods
music. Illegal websites and “peer-to- Consumer research from Harris used to unlawfully acquire copyrighted
peer” networks don’t just deprive Interactive (explored later in the report) content like music and film have
artists, songwriters and music amongst illegal downloaders revealed evolved and diversified. Currently, the
companies of vital revenue – they that 58% of them used Google to direct main forms of illegal downloading of
also affect the development of the them to free music, for example. music can be divided broadly into P2P,
legal digital music sector. where users host the content on their
Mass unauthorised music downloading computers, and a variety of other
became prevalent with the creation of methods which rely on content held
the original Napster. This was a peer- on a central server.
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Some of the better known examples – Examples of sites/services from the above categories
Rapidshare and Megaupload amongst BitTorrent Tracker/Indexer Piratebay.org; Isohunt.com
them – regularly feature in the Top 50
of the most-visited websites in the Newsgroups Newzbin.com
world, attracting almost as many Forums/Blogs Warez-bb.org; Rlslog.net
unique users as mainstream sites
Aggregators Filestube.com; Beemp3.com
such as the BBC’s.
Hosting sites Rapidshare.com; Mediafire.com
Unlicensed pay sites often resemble
Pay sites Mp3fiesta.com; Legalsounds.com
legitimate retailers, listing albums and
tracks for download at a very low Streaming/Stream ripping Skreemr.com; Fetchmp3.com
price. They are commonly hosted
in Russia/Eastern Europe and often
make false claims that they are fully The role of search engines The predictive search tools offered by
licensed and pay the appropriate Search engines are as popular as P2P some search engines go further by
remuneration to copyright holders. applications as a source of illegal actively directing users towards free
Unauthorised streaming sites allow downloads. It’s not hard to see why. illegal downloads by auto-completing
users to start listening to tracks or Key in the name of any popular artist, artist searches with additional phrases
albums at the click of a button without add search terms like “mp3” or like “torrent”, or providing specific
having to download the whole file first. “download” – both neutral terms – references to unlicensed sources
As we have seen, there are good legal and typically the large majority of like Mediafire or mp3raid.
streaming services available but there results that appear are blatant links
The music industry continues to press
are also many unlicensed ones. Given to illegal downloads.
search engines to help consumers stay
the increase in streamed content, on the right side of the law and has
In a single week in November, BPI
stream ripping sites and software suggested concrete solutions such as
test searches were made on Google
are becoming increasingly popular, prioritising music search results in
for the UK’s top 20 singles or albums,
enabling users to capture the source favour of legal online services such
followed by “mp3”. On average 17 of
audio from a legitimate streaming as those highlighted by the Music
the first 20 Google results for singles
service (such as YouTube or Spotify) Matters campaign.
and 14 of 20 search results for albums
and convert it into downloadable
were links to known illegal sites.
MP3 files.
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A failure to act on illegal downloading continues to undermine the potential for the digital music sector to expand, eroding
value for investors, entrepreneurs and innovation in general. Two companies here explain the challenge of investing in
music in a market distorted by unchecked competition from digital piracy.
Ingenious Media
Ingenious has been heavily involved in media that the album only sold around 600,000
investment and, more particularly, investment copies in the UK and 1.5 million across Europe,
into the music space since the late 1990’s, whereas in the ‘pre-piracy’ era sales would
ranging from advisory to direct investment have been two to three times this number.
into traditional music companies. In 2005-6, The success of that album certainly helped
Ingenious raised in excess of £40m for two the record label, Cooking Vinyl, to double in
funds aimed at direct investment in recorded size, thereby creating significant employment.
music artists with a view to generating However investment in music content is a
significant commercial success from financially ‘hits driven’ play where the hits must pay
supporting both new and existing performers. for the misses, which are inevitably far more
As we began investing, it was apparent that the numerous. Our experience across the music
recorded music market was rapidly becoming investment portfolio is that the successes, as
more and more difficult as the landscape was eroded by piracy, are no longer big enough to
becoming dominated by illegal downloading. One compensate for the misses in what remains
of our early releases by a very successful band an incredibly risky investment space.
sold roughly 150,000 units in the UK (the band The music industry is going through massive
had sold in excess of 3 million units in the UK structural change, which has destroyed
with previous albums) and further investigation traditional business models, while new models
showed that, from one major bit torrent site are emerging driven by scores of new entrants
alone, a further 150,000 copies had been to the market. Sadly, few, if any, of them are
illegally downloaded! We estimated that in driving significant revenues, let alone making a
excess of 1 million units of the album were profit. Against that background it seems clear
‘stolen’ in this way. to us that further positive action to combat
In 2009, our second music fund invested in piracy is crucial if the industry is to survive
helping to resurrect the career of The Prodigy, in a recognisable form.
resulting in the biggest selling independent
album in Europe that year. The problem was Paul Bedford, Investment Director
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As we have seen, despite the unfair Awareness – Sources of It’s clear that legal services face
competition that licensed digital Unauthorised Music Downloads a difficult battle to compete while
services face from illegal sources of Aware Of knowledge of unlicensed services
music on the internet, legal services is so commonplace.
have obtained a strong foothold among P2P 74%
internet music fans. But what share Cyberlockers 66% Usage of Music Services
of overall music downloading and
MP3 search engine 51% The survey also asked respondents
streaming do they represent in the UK,
and how can this share be increased? Overseas pay sites 45% whether they were users (regular or
Source: Harris Interactive/BPI Digital Music Survey occasional) of both legal and illegal
To answer this, in September 2010 Base: all respondents sources of music. This does not, in
BPI commissioned Harris Interactive itself, reflect the actual volume of
to conduct some in-depth research via music being acquired from any one
an online survey into the awareness, Awareness of many of the legal source and the high level of incidence
usage and attitudes towards both legal channels – from download stores reported by Harris’ respondents
and illegal acquisition of digital music. to streaming sites and radio/video suggests that for many sites there
Respondents were aged between 16 services – is very high. Over 90% of all may well be a significant number
and 54 and of the 5,000+ surveyed respondents were aware of YouTube, of infrequent users.
29% were engaged in some form of while eight out of ten were familiar
unauthorised music downloading. with the availability of music via social While services such as YouTube enjoy
networking sites and online radio. Two relatively high levels of usage among
Awareness – Legal Services thirds (65%) were aware of the legal respondents, the survey also showed
Aware Of streaming service Spotify and only that the popularity of both P2P and
6% were unaware of any of the legal non-P2P is high. Around a quarter
Legal download stores 94% download services currently available. (23%) of all respondents stated that
Music videos from YouTube 92% Clearly the internet population is well they use P2P services and over one
informed about the legal access points in 10 (13%) were using either blogs
Radio station website 85%
for music in the online environment. or boards and forums to find links
Music via social networks 83% At the same time, knowledge of for music content on hosting sites.
Spotify 65% unauthorised online sources is high – It is also worth noting that the level
three quarters of all respondents were of acquiring music unlawfully via
Last.fm 54%
aware of P2P as a source for illegal cyberlockers, for example, is almost
downloads and two thirds were aware as high as the legal (and much-
that storage sites such as Rapidshare publicised) streaming service Spotify.
and Hotfile are also prevalent sources.
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Reported Usage of Music Sites and Among illegal downloaders, P2P Demographic Breakdown of Legal
Services (% using, any frequency) is still clearly the main channel for and Illegal Downloaders (% down)
acquisition of music. Four in every five Legal Illegal
Legal Services stated that they use such sites and
software, although there are also high Male 53% 60%
TOTAL levels of usage for methods such as Female 47% 40%
Music videos from YouTube 54% blog and board links to cyberlockers
16-24 19% 24%
(47% and 44% respectively) and MP3
Legal download services 41% 25-34 35% 38%
search engines (42%). Well over half
Radio station websites 34% (58%) of these respondents had used 35-44 29% 23%
Music via social networks 27% the search engine Google to lead them
45-54 17% 15%
to free music downloads.
Spotify 18% Source: Harris Interactive/BPI Digital Music Survey
Last.fm 15%
Profile of Users
we7 8% What is being downloaded?
Well over a quarter (28.8%) of
respondents in the Harris Interactive The survey shows that usage of P2P
Sources of Unauthorised survey were involved in illegal music is of course not limited to music
Music Downloads downloading. Men account for 60% of downloading, but that music is the
TOTAL those acquiring music unlawfully and most popular type of content accessed:
the profile is biased towards younger
P2P sites and software 23% people, with 62% aged under 35 and % of Respondents Downloading
Cyberlocker links via blogs 13% the 25 to 34 age group accounting for Entertainment Content from P2P
Cyberlocker links via 13% the biggest single share (38%). The Music 23%
boards/forums youngest (aged 16 to 24) comprised Films 20%
almost a quarter (24%) of illegal
MP3 search engine 12% downloaders, compared to just under TV programmes 19%
Source: Harris Interactive/BPI Digital Music Survey a fifth (19%) of those who downloaded Software (non-gaming) 18%
Base: all respondents
music legally. The Harris data also
Video games 15%
showed that this age group were
Source: Harris Interactive/BPI Digital Music Survey
proportionally the heaviest users
Base: all respondents
of illegal services, although not
the largest group numerically.
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Almost one in four (23%) of The Scale of the Problem MP3 search engines and cyberlockers
respondents said they used P2P of Illegal Downloading stated that they too visit these sources
services to acquire music, with one in at least weekly. In total, users of these
10 (9%) doing so at least fortnightly. P2P remains the biggest single four key methods downloaded an
Film and TV programmes were the source, accounting for 46% of all average of 6.3 tracks per month.
next most widely downloaded, with tracks acquired from services in
one in five (20%) stating that they the chart below, with each P2P user Harris Interactive estimate that the total
use P2P sources for the former. acquiring an average of eight tracks number of users across each of these
per month via this method alone. four main categories of unauthorised
Users of these sources do so on a downloading (P2P, links via forums/
fairly frequent basis too – well over cyberlockers, MP3 search engines and
half (57%) of those downloading tracks overseas MP3 pay sites) is 7.7m.
via overseas pay sites claim to do so
weekly or more often. Over four in Scaling up self-reported levels of
every 10 that professed to using P2P, unauthorised track downloading from
the Harris survey suggests that some
80m tracks are acquired from these
SOURCE OF UNAUTHORISED
sources every month. Across a whole
DOWNLOADS (% Vol)
Overseas year this amounts to almost a billion
MP3 sites songs unlawfully acquired.
11%
This figure, however, will be even larger Illegal Downloading Trends Nevertheless, data from UKOM/Nielsen
considering the other methods by which – Monthly Usage – which monitors actual website and
music can be illegally obtained, such application usage (for the UK Online
as email, IM and newsgroups. A Measuring illegal downloading is by its Measurement company on behalf of
conservative estimate of all illegal very nature difficult. Respondents to the UK online advertising industry)
tracks may therefore be in the region of consumer surveys are often unwilling – provides valuable information to
1.2bn in 2010. This figure dwarfs the to admit to behaviour that they know assess the changing patterns of
legal music market downloads figure: to be of dubious legality. Similarly, usage of different types of sites and
BPI forecasts that some 370m tracks methodologies that measure actual services. UKOM/Nielsen’s minimum
across singles and albums releases will online behaviour are also likely to panel size is 35,000 individuals in
be purchased in 2010. If that were to be under-represent some activities at the UK, is representative of the online
the case then legally obtained tracks the fringes of social acceptance. population and tracks actual online
would only constitute about a quarter behaviour both at home and at work.
of all those downloaded in the UK. As their survey is ‘opt-in’, i.e.
participants choose to join and install
software on their PC knowing that
TRACKS ACQUIRED they are being actively monitored
BY SOURCE (UK) 2010 Legal online, it is reasonable to assume that
(Volume and %) (370m = 24%) a significant number of heavier users
of illegal sites and services are not
represented on their panel.
BPI track via UKOM/Nielsen’s panel Note: This graph excludes usage of websites such as The Pirate Bay and Torrentz – it represents the total number of
UK users of the Ares, BitTorrent, eMule, Frostwire, Limewire, Soulseek, uTorrent and Vuze applications each month.
over the past year. In September of
2010 the user numbers of these LIMEWIRE V SPOTIFY USAGE – MONTHLY USERS (Thousands)
totalled 4.3m; across the whole year, 2,500
the average was around 4m.
The graph (right) illustrates the usage
2,000
of Limewire (one of the most popular
P2P applications) in relation to Spotify,
the most successful legitimate
1,500
streaming service available. Although
monthly usage of Limewire has
declined since March 2009 and the 1,000
number of people using Spotify has
risen impressively, the number of
people using Limewire on a monthly 500
basis has been 45% higher than for Limewire
Spotify during the course of 2010. Spotify
0
Although this is significant growth,
09
Se 9
09
Oc 9
De 9
9
09
Ma 9
10
Se 0
No 9
10
0
10
10
10
Ma 0
Au 9
0
Au 0
r-0
r-0
t-0
the graph shows how the use of
1
r-1
l-0
r-1
y-
y-
g-
g-
c-
p-
p-
v-
l-1
n-
n-
b-
n-
Ma
Ma
Ap
Ap
Ju
Ju
Ju
Ju
Fe
Ja
illegal services continues to eclipse 29
that of legal alternatives. Source: UKOM/Nielsen
6752_TDM2010_AW_rev:Layout 1 13/12/2010 09:40 Page 30
The Rise of Non-P2P THE INCREASED USAGE OF HOSTING SITES (Audiences, thousands)
Usage of hosting sites is becoming 1,400
much more commonplace. UKOM/
1,200
Nielsen data shows there were 1.3m
unique users in September 2010 and 1,000
the chart below shows how usage
of specific sites has been generally 800
increasing since the beginning of 2009.
600
While services such as Spotify and
we7 are attracting growing numbers 400
of users, so too are unauthorised
applications such as uTorrent and 200
hosting sites such as Megaupload and
Hotfile, which are popular sources of 0
infringing content. The net effect over
Fe 09
Ju 9
Au 9
M 09
Oc 9
Se 09
Ja 9
M 09
No 9
De 09
Fe 10
Ju 0
Au 0
Ap 9
Ju 9
M 10
10
Se 10
M 10
Ap 0
Ju 0
0
l-0
0
t-0
-0
1
l-1
-0
-1
-1
n-
n-
n-
n-
r-
p-
r-
p-
g-
g-
c-
b-
b-
v-
ar
ar
ay
ay
the 12 months ending in September
Ja
is that while total usage of P2P
applications has remained relatively Megaupload.com RapidShare MediaFire Hotfile
flat in the UK, usage of hosting Source: UKOM/Nielsen
sites and other non-P2P sites and
applications has risen significantly.
Competing with ‘Free’ who had been previously warned, Tackling illegal downloading has
The Harris survey also looked at the while over a third (36%) believed that been the biggest challenge the music
reasons given by some respondents websites offering music illegally should industry has ever faced. There is no
for their decision to download music be blocked or banned from the internet. silver bullet that will solve the problem.
unlawfully. As might be expected, the Many were also aware of some of the The industry recognises that a multi-
most popular reasons cited were cost ethical issues at stake – 56% stated faceted strategy is needed involving
(‘It’s free’ was the most common reason that downloading illegally is not fair licensing our music to all kinds of new
given) and convenience. Many of to artists and songwriters. Levels of digital services that meet the needs
those surveyed seem to have simply agreement were unsurprisingly higher of different consumers. This includes
become accustomed to getting their among all respondents and significantly educating fans about how to get music
music this way (‘Grown used to doing higher among those who only legally and about the risks of illegal
it’ (22%) ranked highly) without being purchase music legally. downloading, driving consumer
challenged, with several citing that they
are unconcerned about the prospect of REASONS FOR DOWNLOADING FROM UNAUTHORISED SOURCES
possible action being taken against them.
All seem to point towards the fact that
It's free 52%
the absence of any effective action to
prevent unauthorised downloading has Grown to used to doing it/Habit 22%
led to this behaviour becoming ingrained
as part of everyday leisure activity. Pay enough for broadband already 19%
Music Matters
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All this must be, however, viewed WHY HAVE YOU STOPPED USING P2P?
against the background of an overall
rise in net usage. When users of each Better pay services available now 29%
group of unauthorised sources were
asked about their activity in the last six Not fair to artists & songwriters 24%
months, a net increase was recorded
against each source. Among P2P Use free streaming 23%
users, there was over a third (35%) services instead
who reported greater usage, compared Use social networks
21%
to only 28% who stated their activity more for music
had decreased. This increase was Use forums, blogs etc
16%
especially notable among younger P2P more instead
respondents with 46% of 16 to 24 year Have downloaded most
13%
olds reporting that their usage had of songs I want
increased, compared with 26% who Worried I would get caught 12%
stated that it had decreased. This is
despite media coverage of measures It's wrong to use
12%
proposed under the Digital Economy unauthorised services
Act and also a great deal of online
discussion instigated by the artist 0 10% 20% 30% 40%
community, along with music industry Source: Harris Interactive/BPI Digital Music Survey
initiatives to promote legal services. Base: all lapsed P2P users
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These ranged from downloading Combining messages about the message that illegal music downloading
incorrectly labelled or poor quality risks of filesharing, the availability of is wrong but also steer consumers
tracks to the more serious issues legitimate online music services and back towards services that reward
of encountering spyware, viruses broader communications strategies artists and all the backroom people
or trojans. When questioned further about the economic and cultural who help to create great music.
about the consequences of the importance of music can go some
problems they had encountered, way to changing consumer behaviour. Not only will this ensure that Britain
12% said that they had to have their continues to punch well above its
PC or laptop repaired and 17% said But this will only go so far. It must weight as a music nation, it will spur
that their PC or laptop crashed and be backed by graduated but robust on investment and innovation in the
was unusable for a period of time. measures against persistent illegal legal content sector, creating new
filesharers and unlicensed websites. jobs and a better online music
These should not only send a clear experience for everyone. 35
6752_TDM2010_AW_rev:Layout 1 13/12/2010 09:40 Page 36
BPI gratefully acknowledges the assistance provided by these companies in the compilation of this report:
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