It's the 800-pound gorilla in the room that everyone would like to ignore but can't keep their eyes off of. The music industry has been hit hard by illegal music downloading, forcing them to come up with new business models of packaging their sonic wares to staunch the bleeding. Although there is a little bit of a bright line on the horizon, it's clear that the vast majority of the news has not been good.
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The IFPI (International Federation of the Phonographic Industry), who represents the recording industry on a global scale, has reported in their 2010 Digital Music Report that global revenues have declined by 30 per cent globally between 2004 and 2009. A study by Harris Interactive in the U.K. found that nearly 25 per cent of those who use P2P (peer to peer-directly connecting to another person's computer via the Internet) networks like Kaaza, Morpheus and Bearshare generally pay nothing for music. Another comparative study by Entertainment Media Research discovered that 71 per cent of those who increased their file sharing did it because it was free.
The economics appear to be the most staggering effect of illegal downloads. The Institute for Policy Innovation estimated that as a result of music piracy, over £7 billion is lost annually just in the United States alone. U.S. workers lose £1.8 billion per year. Federal, state, and local governments are deprived of approximately £274 million yearly. Over 70,000 jobs are lost in the music industry as well as other industries connected to it.
Local talent has been affected also, according to the IFPI report. This sometimes has disastrous results since the amount of money that can be invested in local talent dwindles because of music piracy.
For example, in France, local artist album releases were down 60 per cent as well as artist signings by the same amount. In Spain--which has the worst P2P file sharing in Europe--the music industry has decreased to one third of its previous size over the years and local artist sales have dipped by 65 per cent. Music sales in Brazil dropped 40 per cent.
The biggest offender in music piracy is P2P networks. However, there has been massive growth in other methods of illegal downloading. MP3 sites that are unlicensed have seen an increase of 47 per cent. Speciality MP3 newsgroups have risen 42 per cent. Other methods that have seen spikes are MP3 search engines (23 per cent), blogs, forums and links to cyberlockers.
The creative industry as a whole has taken their case to ISPs (Internet service providers) to intervene on their behalf and some studies show that this would be effective. The New Zealand Federation Against Copyright Theft (NZFACT) found that 70 per cent of users would stop downloading illegally if their ISPs could suspend or terminate their accounts. Additional research in France freported that 90 per cent of those involved in illegal file-sharing would stop after a second warning from their ISP.
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