Report: Digital Music Downloading Growing — Legally

When Shawn Fanning first unleashed his Napster application on the world,
some said it would destroy the music industry. Fast forward a
few years and Napster has been sued,
shut down,
sold and now re-incarnated as
a legal music downloading entity.

Napster is part of business that, according to the IFPI,
(the trade organization representing the international record industry) is growing
at an exponential rate.

A new report issued today by the IFPI, “The 2005 Digital Music Report,”
highlights a number of key figures that demonstrate that the legal music downloading
business is flourishing. According to the report, music downloading grew tenfold between
2003 when 20 million tracks were downloaded in the United States and Europe to more than 200 million tracks
in 2004. Users are downloading their tracks from more than 230 different legal music Web sites
in 2004, which is up from only 50 in 2003. The selection from those legal sites has also
grown over the course of 2004 to 1 million tracks.

IFPI claims in its report that more people are buying music online legitimately.
Currently, only 22 percent of music downloaders reported that they are likely to use a
legal service, which is expected to grow to 31 percent in 2005. When the legal definition
is expanded to include any legal source (as opposed to a service) like an artist’s Web site,
the 2005 number jumps to 55 percent, up from 44 percent in 2004.

On the side of the equation, illegal music downloading appears to be taking a hit
from a number of avenues. According to the IFPI report, illegal music files on the Internet
as a whole (including P2P) declined by 30 million files over the course of 2004, from 900
million in January 2004 to 870 million in January 2005. In April 2003 the number of illegal files on P2P networks alone
was one billion.

Part of the decline of illegal file availability may be the result of the Recording Industry
Association of America (RIAA)’s anti-piracy activities: 1.6 billion infringing music files spread across 60,900 private sites,
477 P2P servers and 102 countries were shut down because of the
music industry’s anti-piracy actions.

The report also notes that consumer awareness has risen since law enforcement action has
begun. Seven out of 10 people are aware of the illegality of unauthorized file-sharing.

“One of the biggest stories of 2004 has been the phenomenal popularity of legal digital
music services,” Mitch Bainwol, chairman and CEO of the Recording Industry Association of America
(RIAA), said in a statement. “The public’s growing appetite, both here and abroad, for high-quality,
legal online entertainment services is encouraging news for all those involved in creating music
and bringing it to the public.”

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