Despite piracy, digital music sales catch up to CDs

While the music industry still struggles with online piracy, new reports show that the combination of music downloads and streaming subscriptions have brought online purchases on par with physical sales for the first time.

Digital delivery of music caught up with physical formats like CDs as a money stream for the first time last year, the trade association IFPI said on Tuesday.

It came, however, as overall global sales of $14.97 billion fell marginally from 2013.

Piracy and free Internet sites remain a huge problem for an industry still reeling from the impact of turning music into digital form, which encouraged copying, bootlegs and free music sites, and led to a collapse in sales from $40 billion in 1999.

IFPI, the International Federation of the Phonographic Industry, said in an annual report, that while revenues were down 0.4 percent in 2014 from the previous year, digital formats, including streaming and downloads, had finally caught up with physical formats, with each accounting for about 46 percent of the market. Performance rights and film and related revenues made up the balance.

"We have overall a positive picture, with the biggest market, the U.S., growing and the third biggest market in the world, Germany, growing as well," Edgar Berger, chairman and CEO international of Sony Music Entertainment, said at a news conference.

"If we keep the current trajectory the industry will inevitably grow," he said, adding his view that paid subscriptions to streaming services "will be the predominant performer."

But the IFPI also noted some dark clouds ahead for the industry, including the impact of free delivery of music over Internet sites such as YouTube and dailymotion.com, and the desire of Chinese consumers to get their music for free.

The industry group said it was pushing for legal changes to be made in Europe, and eventually elsewhere, so that YouTube, dailymotion and others could no longer contend they are "safe harbors," immune from copyright violation because users post music and other content themselves.

"Companies that play the role of distributing, monetising, promoting don't belong in the 'safe harbors'," IFPI chief executive Frances Moore said.

She noted that streaming sites such as Spotify and Deezer which pay the industry for music rights had contributed some $1.6 billion in revenues on the basis of having about 140 million users while the free Internet sites, with a billion users, paid something over $641 million.

Berger said there was a "a piracy issue that needs to be fought in China," adding without piracy instead of ranking in 19th place globally for music revenues, it would be in the top five.