The International Federation of the Phonographic Industry (IFPI), said last week that sales of music in digital form had risen only 6 percent worldwide in 2010. With this modest growth rate, it seems that growth of digital music is almost at it’s top, as the rate of increase in digital revenue has halved. If that trend continues, digital sales could reach their top at less than $5 billion this year, many billions of dollars short of the amount needed to replace long-gone sales of CDs. Some analysts in the music industry fear that the potential business volume of digital music is simply a lot smaller than expected.

Executives from the music industry disagree, saying there are plenty of business opportunies. As long as they can come to grips with the costs of piracy, which accounts for the vast majority of music distributed online, the industry will find its way up. Stronger measures to crack down on unauthorized copying are taking effect in a number of countries, executives note, and aside from heavier sticks, the complementary carrots are appearing, too, in the form of innovative, and legal, digital services.

The recent introduction of tougher anti-piracy policy in South Korea and France, which authorize cutting off the Internet connection of repeat offenders, showed that stricter enforcement could persuade people to use legal alternatives to unauthorized file-sharing services. In South Korea, where piracy is common, digital music sales rose 14 percent in the first half of last year, after a new law went into effect in 2009. IFPA said the first account suspensions occurred in the autumn, and they believe the publicity surrounding it deterred consumers. France has also implemented a graduated response. In the French system, cutting Internet access is preceded by two warnings. While the authorities say they have sent out thousands of e-mails to suspected copyright cheats, nobody’s connection has yet been cut.

Meanwhile, industry executives hope the development of new digital services can reduce their dependence on sales of individual tracks. However, the success of digital stores is below expectation. For example, Apple’s iTunes is not skyrocketing outside the US, and Nokia and British TV channel Sky, have even canceled some of their digital music services recently. Of course it is common in every company that not every new product works. But, with growth in digital revenue slowing down, the need for successful innovations is becoming stronger.

Source: The New York Times