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Digital music revenues soar

iTunes and co. takes $350m

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The music industry made $440m out of digital music during the first half of 2005, the International Federation of the Phonographic Industry (IFPI) trade group said today.

The retailers made $350m, IFPI's numbers show - much of it, we'd say, going into Apple's coffers.

According to the trade organisation, $790m was spent on digital music during H1 2005, up 259 per cent from H1 2004's $220m. On that basis, digital accounts for six per cent of record industry sales during the period.

That said, that covers not only a la carte downloads and subscription-based rentals but from mobile phone ringtones too, though only those that are complete or partial songs - monophonic and polyphonic ringtones are not included, IFPI said. IFPI did not provide a break-down between mobile sales and computer-downloaded sales.

Excluding "retail margins", digital sales totalled $440m, IFPI said. On that basis, around 44 cents in every dollar spent on digital downloads went to the retailers, more than the 33 per cent Apple was originally exposed to be making.

But if digital sales were on the up, physical media revenues continued to slide, down 6.3 per cent year on year to $12.4bn worldwide. Unit sales fell 6.6 per cent. Singling out CDs for further attention, sales were down 6.7 per cent by value, 3.4 per cent by units.

Overall, the global recorded music market fell 1.5 per cent to $13.2bn from $13.4bn.

Russia was one of the few territories to see increases in CD sales. Given the experience of Western and Asian markets, it's no surprise to see that the 21.2 per cent increase in market value arises from a shift from cassette sales to CDs - essentially, Russian music fans are going through a process we went through in the late 1980s and early 1990s: buying music again, this time on CD. This is particularly interesting because you might expect the Russian market to be more affected by illegal downloads. The fact is, however strong music piracy is here, it's outweighed by demand for CDs.

Mirroring the Russian example, the Indian market saw a continuing shift from cassette to CD, leading to a 15 per cent increase in CD units, though the market was down 2.4 per cent in value.

France too saw album sales rise, up 9.5 per cent in units, but only 1.2 per cent by value. Overall physical sales were up 2.7 per cent by value, 7.5 per cent by volume. Canadian unit sales were up "slightly", but value-wise the market shrank, "primarily due to retail discounts", IFPI said.

In the UK, physical sales fell four per cent by value, 1.7 by units in H1 2005, IFPI said. Germany's physical sales figure fell 7.7 per cent year on year. The US saw a drop in physical sales of 5.3 per cent in value and 5.7 per cent in units. All these markets experienced strong year-on-year growth in the download sector. ®

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