Online and wireless music sales tripled in 2005

updated 1:54 p.m. ET Jan. 19, 2006

LONDON - Worldwide sales of music via the Internet and mobile phones hit $1.1 billion last year, almost triple 2004 sales and accounting for 6 percent of global record companies' revenues, an industry group said Thursday.

The International Federation of the Phonographic Industry, or IFPI, said the legitimate music business was gradually gaining ground on digital piracy. It said research showed that in Europe's two biggest digital markets — Britain and Germany — more music fans are now legally downloading music than illegally file-swapping.

"2005 was the year that the digital music market took shape," said IFPI Chairman John Kennedy.

Another big success story was sales of mobile-phone ring tones, which now account for around 40 percent of record companies' digital revenues, Kennedy said.

"In the cellular or mobile world, there is a culture of payment" that didn't exist in the early days of the Internet, said Adam Klein, EMI Group PLC's executive vice president for strategy.

In the case of Internet downloads, Kennedy said a series of court judgments against unauthorized file-sharers in 2005, including Kazaa and Grokster, had helped transform the digital music market.

Kennedy also put Internet Service Providers, or ISPs, on notice that the IFPI would consider litigation against them if they did not join the fight against piracy. Kennedy said he approached prominent ISPs a year ago about a coordinated response and has received "effectively a zero response."

A series of lawsuits against piracy by the IFPI have so far largely targeted individual song swappers for breach of copyright rather than ISPs, which can claim they have no knowledge of piracy occurring on their networks.

The London-based IFPI said music fans around the globe downloaded 420 million single tracks in 2005, more than double the 156 million downloaded the previous year, when record companies' revenues from downloads were $380 million.

In the United States alone, single-track downloads doubled year-on-year to 353 million units in 2005, the IPFI said. Album downloads rose to 16 million and accounted for nearly 3 percent of the total U.S. album market.

In Europe, the United Kingdom led the way with 26 million single-track downloads, followed by Germany (21 million) and France (15 million).

However, Kennedy warned that a lack of "interoperability" of different portable music devices and download systems was hampering future growth in the digital music market. Industry leader Apple Computer Inc.'s iPod portable player and iTunes download system use different technology than other devices.

Industry forecasts for future digital growth vary. Some analysts suggest that 25 percent of record company revenue could come from digital sales by 2010, others put the figure at less than 10 percent.

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