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Ringtones prop up Australian recording industry

Sales fall again...who's to blame this time?

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Comment Yesterday, the Australian recording industry went through its annual ritual of announcing a fall in music sales. Although, this time ARIA didn't blame digital music piracy for the fall - fans of the ARIA blame game will be pleased to see they industry included the obligatory reference to digital music piracy anyway - just for old time's sake.

According to ARIA, "a decline in the size of the physical market was observed". ARIA blamed this result on "the ongoing highly competitive retail environment for entertainment based products, including competition from DVDs and console games". This sounds like an admission by ARIA that the reason sales fell is that its stakeholders are unable to compete with changing consumer tastes and can't match developing products in other industries.

ARIA added: "The rapid penetration of high speed (broadband) internet access into households is also cited as a contributor to the decline in physical sales. While broadband provides the necessary platform for the development and success of legitimate online businesses, it also makes it easier for illegal internet downloading of music to occur."

So the blame can also to be shared with ISPs who have implemented broadband and "legitimate online businesses". These are the same companies who took the trouble to embrace the digital revolution in the first instance!

It is clear that ARIA believes the main reason for the downturn in sales of physical product is the online sales that they licence and not illegal file sharing, which has continued unabated despite various enforcement actions.

ARIA makes much light from the increase in the "legitimate" digital market claiming "wholesale value of the digital market in 2005 was almost $8m (or around 1.5 per cent of the overall value of the wholesale market). Moreover, 34 per cent of that overall value was earned during the last two months of the year, following the October launch of Apple iTunes in Australia".

It's an impressive result on the surface. But how many of these $8m sales are ringtones and how many are the digital equivalents of CDs/albums? We don't know the answer to this question because ARIA won't tell us. This is despite ARIA's press release of 12 September, 2005, covering Australian recorded music sales for the six months to 30 June 2005, when they said: "The first half figures do not include digital music sales, including emerging sales of 'mastertone' ringtones." Based on that statement, when they finally released digital download figures we would have expected ringtones to have been separately listed. But no such luck...

However, there are clues which suggest ARIA's sales figures have been substantially inflated by the sales of ringtones.

In 2005, Hutchison 3G issued a press released saying it had sold 35,000 copies of the Eric Prydz ringtone of Call On Me.

Sony/BMG recently reported it had passed 2m digital sales. However, Emmanuel Candi, a senior executive from Sony BMG Entertainment Australia, admitted that the value of ringtone sales was already bigger than CD single sales.

Even Destra, one of the early supporters of authorised digital downloads in Australia acknowledged the popularity of ringtones by signing a deal with Legion Interactive for the provision of mobile ringtones.

The popularity of ringtones and the lack of take-up of digital downloads in the form of "albums" and "singles" is not a secret of the music industry - a senior executive from APRA (the music publishers' collecting society) wrote as far back as 2004 that, "it is ironic that kids are prepared to pay $10 for a ringtone, but generally will not pay for a download of a CD from the internet".

The big question for the Australian record companies is when did online piracy stop being a cause of plummeting sales? After furiously blaming illegal downloading for the downfall in sales for the past few years, the only things that have changed this year is that the record company control over sound recordings has been ceded to another near monopoly in Apple, and they lost their anti-piracy guy. And where are those ringtones?

Alex Malik is a lawyer and PhD researcher at the University of Technology, Sydney, Australia

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