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The day the music died?

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 14 May 2010

Illegal music sharing, which costs the local music industry about R200 million in lost sales a year, could be its death knell, if it doesn't find a way of competing aggressively online, note market commentators.

The total local music industry is worth about a billion rand and, although legal sales online are small, they are growing and are expected to continue doing so. However, illegal downloads are expected to expand at 15% a year over the next five years and are already worth R200 million.

Digital music piracy, in the form of unlawful downloading and sharing of copyrighted music over the Internet, is a real threat to the local music industry, says Recording Industry of SA (RISA) operations director David du Plessis.

Du Plessis says RISA's information indicates about 3.6 million songs are unlawfully downloaded in SA every month, which is estimated to cost the recording industry about R18 million a month.

“SA's Internet usage grew by 110% during the period 2000 to 2009. Such rapid growth, coupled with faster broadband connectivity, is likely to have a significant impact on the local music industry,” says Du Plessis. Illegal downloads are expected to grow as more people get connected to the Internet.

Move online

Arthur Goldstuck, MD of World Wide Worx, says the recording sector needs to have developed a viable and attractive download model by 2015, or it will be “in deep trouble”.

Goldstuck says that for years, people have ended up buying entire CDs for one song, or because the marketing was so good that they thought the entire disc was a good deal. “The industry model is based on giving less value than what the consumer is buying; they can't continue ripping off consumers. If they do, people will go the illegal route.”

Illegal file sharing is also expected to grow, as more South Africans become connected to the Internet, and the music industry continues to enforce digital rights management (DRM), which limits the amount of times a downloaded song can be copied, says Goldstuck. “The day the music died was when DRM was invented.”

The recording industry needs to join the move to digital and offer people attractive deals to purchase music, he says. Goldstuck adds that the sector should not be fighting the move, as to do so would earmark it for demise.

Losing battle

Lance Michalson, a partner with Michalsons Attorneys, says there are criminal and civil penalties that can be brought against people who pirate. For a first offence, a fine of R5 000 per item, or three years in jail, can be levied. This goes up to five years, or R10 000 an item for repeat offenders.

Michalson adds that offenders could face a lawsuit from RISA or the artists for damages arising from copyright infringement. This will usually include the retail price of the pirated items, but could also include other amounts, he says.

“The law is very clear, and RISA could successfully bring charges against anybody who illegally downloads music. Practically, however, this is not feasible.”

He explains that court rolls are clogged and, in Cape Town alone, it could take up to four years to get a date in the High Court.

“It is my understanding that RISA tends to focus on people who distribute pirated music, and not those who download it,” says Michalson.

He explains the industry organisation only has authority in SA. However, it is a member of the International Federation of the Phonographic Industry (IFPI), which would aid it in taking on pirate sites that lie outside of SA that are distributing illegal copies of South African music, he states.

Michalson's personal opinion is that the music industry has to go digital in order to survive. Digital sales models would “counter at least two aspects that make Internet piracy so appealing; namely cost and convenience.

“For these models to be successful, cheap, high-speed Internet access would need to become readily available to all South Africans. Currently, this is not the case, but we are starting to see bandwidth prices drop and the possibility of uncapped Internet that is affordable for everybody is slowly becoming a reality.”

He points out that there is a shift in the entire model of “selling” music in the digital age. Nine Inch Nails, for example, has released a number of its latest albums on its Web site, available free of charge. Similarly, the Dave Matthews Band actively encourages its fans to record the band's concerts live, and distribute them to other fans.

Death of the CD?

Keith Lister, CEO of Sony BMG in SA, says the music industry is facing its most challenging time ever. He explains that the sector is losing revenue in the “physical” market as CD sales slow. This is not being compensated for in new revenue streams such as digital sales, he notes.

Robbie Ferns, Musica merchandise executive, says CD sales in the local market have declined about 10% year-on-year. “There are no clear statistics that show this decline is a direct impact of downloads.”

He attributes the decline in CD sales to the recent economic slump, saying it is difficult to quantify what impact downloads had on the company's music business over the past year.

Patrick Raymond, CNA merchandise executive, says sales have recently slowed in the market, but “it is difficult to say whether this is due to downloads, the state of the economy or a combination of the two”. He points out that music is generally considered a discretionary purchase.

Raymond expects SA to lag developed countries with legal digital downloads, “but the threat to conventional music sales cannot be ignored”.

Global issue

Research released by IFPI at the end of April indicates global music sales fell 7% last year. IFPI chairman and CEO John Kennedy says piracy is hampering growth in the market.

The IFPI represents the recording industry worldwide, with 1 400 members in 66 countries and affiliated industry associations in 45 countries.

The legitimate digital download music industry in SA last year was worth R30 million, and the entire segment was worth R1 billion. Goldstuck says illegal downloads are worth around R200 million in SA.

The IFPI reported physical music sales down 12.7% globally, but digital music sales rose 9.2%, to $4.3 billion, more than 10 times the digital market value in 2004. Digital channels now account for 25.3% of all trade revenue to record companies, comments Kennedy.

He says the industry could grow, but this depends on how quickly governments tackle the issue of piracy.

Peer-to-peer piracy remains the most prevalent channel for illegal distribution of unauthorised content, accounting for more than 20% of Internet traffic globally. This increases to 35% in Latin America and 29% in Europe, notes Kennedy.

Related story:
Piracy is not a crime

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