Face the music: CD royalties ain't what they used to be

Published on Sunday 14 March 2010 21:54

MUSIC sales have reached a critical tipping point with the rise in value of digital downloads outstripping the decline in CD sales for the first time.

Last year, money generated from music downloads grew by 12.8 million while the value of CDs snapped up dropped by 8.7m.

The figures, compiled by PRS for Music – formerly the Performing Rights Society – a not-for-profit body which ensures creators are paid whenever their music is played, performed or reproduced, illustrates a significant shift in the way consumers are choosing to buy their music.

The organisation, which represents 65,000 songwriters, composers and music publishers, said they had recorded a 2.6 per cent rise in revenues in digital music growth in 2009.

They also reported royalty revenues of 623m in 2009, up from 608.3m a year earlier.

It said tougher trading conditions in the UK music market were offset by strong growth internationally and by the licensing of new digital services.

Online revenues grew 12.8m, or 72.7 per cent, to 30.4m last year compared to CDs and DVD sales which dropped by 8.7m.

The growth in online revenues reflects a series of licence agreements by the likes of MySpace Music, YouTube and iTunes.

At the same time, revenues from mobile phone ringtones more than halved to 2.5m last year.

Public performance revenues, including clubs, music venues and commercial premises, increased by 2.4 per cent.

Despite an estimated 39 pubs closing each week, PRS said it had seen only a small reduction in revenues from pubs as most saw music as an integral part of their business.

PRS for Music chief executive Robert Ashcroft said it was still too early to say whether this represented a turning point for the industry but said it showed a significant shift in the way consumers were buying music.

He added: "The next decade does, however, promise further growth in earnings from the legal digital market as well as the use of British music overseas."

PRS members receive nearly 90 per cent of the revenues collected by the organisation.

It collects set lists from more than 7,000 music venues each year to ensure members are accurately paid for their performances, as well as ensuring royalties for music played on all UK TV and radio stations.

PRS said 90 per cent of its membership earn less than 5,000 a year and depend on their royalties to remain in the music business.

Leigh Sparks, professor of Retail Studies at the Institute for Retail Studies at the University of Stirling, said: "What is clear is that there has been shift from the physical format of music to digital format.

"What the digital format had to initially overcome was the problem of piracy and how to make money but it seems to have adapted and has now got on top of developing the commercial side."

However, he said that although it heralded a change for mainstream music shops, the digital revolution would create opportunities for specialist music stores and radio stations to flourish.

"For some music lovers there is still the attraction of going to specialist stores and chatting to there people with similar interests," he said.

"There is also a gap in the market for localised specialist music stations – the trick, however, is working out how to make them pay."

IN NUMBERS

623 million

royalty revenues in 2009

608 million

royalty revenues in 2008

72.7 per cent

growth in online revenues in 2009, to 30.4 million

2.5 million

revenue from mobile phone ringtones in 2009

19.4 per cent

rise in revenues from British music used abroad in 2009

2.4 per cent

rise in revenues from public performances, including clubs, music venues and commercial premises