Digital music nation 2013

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CONTINUE READING
Digital music nation 2013
The UK’s digital
      music landscape

                          2013

digital music
       nation
Digital music nation 2013
CONTENTS

BPI (British Recorded Music Industry)    02                                             24
Riverside Building
                                         Digital Music Nation 2013                      the challengE of illegal free
County Hall
Westminster Bridge Road
                                         by geoff taylor                                illegal music downloading in the uk
London SE1 7JA                                                                          creating breathing space for legal services
Tel: 020 7803 1300                       04                                             support for action on piracy
                                         UK digital music at a glance                   in conversation with ole obermann
www.bpi.co.uk                                                                           in conversation with leanne sharman
                                         06
                                                                                        30
                                         Music leads the charge
                                         in digital innovation                          what’s next for digital music?
                                         Digital highlights of 2012                     the move towards 4G integration
                                         music as a driver of social media engagement   looking ahead with mark foster
                                         the album as app                               deals and services for a new audience
                                         adding value to the music experience           music connectivity in the home
                                         in conversation with cosmo lush                in-car audio

                                         16
January 2013
Designed and produced                    digital music’s tipping point
by Dogstar Abstracts                     the digital music switchover
                                         legal and illegal music consumption
© 2013 BPI LIMITED                       streaming services take off
No part of this book may be reproduced
                                         ownership versus access
in any form without written permission
from the copyright owner.                in conversation with paul smernicki
Digital music nation 2013
Digital Music                   BY GEOFF TAYLOR
                                A decade ago, the outlook for
                                                                                              Social media continued to grow in importance in 2012
                                                                                              with some acts, such as Lady Gaga, setting up their
Nation 2013                     the record business was gloomy.
                                                                                              own social networks while others, like Blur, turned to
                                                                                              them to debut new songs. While they are changing the
                                ‘Digital music’ was dominated                                 very nature of engagement between musicians and fans,
                                by piracy; the market for legal                               they are also playing an important role in music discovery
                                services had barely emerged.                                  and recommendation, and Facebook’s Open Graph and
                                                                                              Graph Search look set to deliver this further.
                                Looking back over the past 10 years, from when
                                                                                              UK labels are strategically well placed to take advantage
                                the iPod was still a new device for consumers, the
                                                                                              of these developments. English is a global language.
                                speed of innovation has been dizzying. In that decade
                                                                                              Labels have become experts in using digital and social
                                we have seen the entry of iTunes, Amazon MP3,
                                                                                              media marketing to build and connect with a global
                                7digital, YouTube, Spotify, Deezer, Rdio, Vevo, Xbox
                                                                                              fanbase, as the international success of bands like
                                Music, Google Play and more – not to mention the
                                                                                              One Direction, Mumford & Sons and Muse illustrates.
                                arrival of Facebook, Twitter, smartphones, tablets,
                                                                                              We can now market our music to the world more
                                mass broadband, 3G and now 4G mobile connections.
                                                                                              effectively than ever before. Alongside all this innovation,
                                The music industry has embraced all of these                  piracy remains a continuing challenge, although the
                                changes, which has helped drive impressive growth             growing appeal of streaming services, from Vevo to
                                in digital – not just in revenues but also in the diversity   we7, Spotify, Deezer and Rdio and progress on blocking
                                of services in the market. There are now over 70              illegal sites and delisting illegal search results means
                                licensed music services in the UK, meeting a huge             the elements are in place to help carry users over
                                range of consumer needs.                                      from unlicensed sites to fully licensed ones.
                                Like the US, Sweden and South Korea before it, the            The introduction in 2012 of the Official Streaming Chart
                                UK experienced an important tipping point at the start        stands as an important marker of how far we have come
                                of 2012 when digital music revenues overtook physical         in such a short period of time. It comes eight years after
                                music revenues for the first time. More affordable,           the first download chart and today downloads make
                                capable and easy to use tablets and mobile devices            up almost 100% of the singles chart. The change has
                                are bringing more consumers to digital music for the          been seismic. And it continues. Market growth and
                                first time and both the music business and digital            digital innovation are dynamically intertwined, meaning
                                music services are rising to meet them.                       the next 10 years should be equally as game changing
                                                                                              and thrilling, as we look forward to the impact of 4G,
                                The consumer is at the heart of these changes.
                                                                                              connected TVs and in-car streaming on the horizon.
                                The emphasis placed on design, convenience
                                and speed is encouraging music fans to transition             UK record labels are in the vanguard of this new wave
                                quickly from testing the waters with a download to            of global opportunities. Digital is in our DNA and music
                                building a digital albums collection or subscribing to        is set to realise its potential for growth in a fully
                                a streaming music service. The music consumer in              connected world.
                                2013 is dramatically different from the music consumer
                                of 2003 and it is to the credit of everyone in this
                                ecosystem – labels, artists, publishers, digital services,
                                technology companies – that the platforms are in
                                place to meet their growing expectations.
                                                                                              Geoff Taylor
                                                                                              Chief Executive, BPI

BPI digital music nation 2013   Introduction                                                                                                                 02 / 03
Digital music nation 2013
UK digital music
at a glance

                                                                                                                                                                                                                             1    Official Charts Company

189,000,000                                              22,000,000                                              20%                                                   345,000,000                                           2
                                                                                                                                                                                                                             3
                                                                                                                                                                                                                             4
                                                                                                                                                                                                                                  BPI
                                                                                                                                                                                                                                  UKOM/Nielsen
                                                                                                                                                                                                                                  Kantar
Sales of singles in 2012, 99.6% of which were digital1
                                                         Monthly UK audience for YouTube    3
                                                                                                                 Proportion of Spotify’s global users who are paying   Number of tracks downloaded using BitTorrent          5    Harris Interactive
                                                                                                                 subscribers                                           between January and June 20128                        6    EMI Music Consumer Insight
                                                                                                                                                                                                                             7    YouGov Sixth Sense
                                                                                                                                                                                                                             8    MusicMetric

938,000,000                                              27.7%                                                   93%                                                   44,000,000
                                                                                                                                                                                                                             9
                                                                                                                                                                                                                             10
                                                                                                                                                                                                                                  Futuresource Consulting Ltd
                                                                                                                                                                                                                                  ABI Research

Digital tracks sold to date in the UK                    Percentage of Brits who purchase downloads
by December 20121                                        or stream content legally4                              Satisfaction rate with music streaming services   6
                                                                                                                                                                       Forecasted number of 4G subscribers by 20169

114,000,000                                              3,700,000,000                                           1,000,000,000+                                        18,000,000
Digital albums sold to date in UK by December 2012  1
                                                         Number of audio streams in the UK in 2012    1
                                                                                                                 Number of playlists already created on Spotify        Potential number of tablet owners by 20169

71                                                       £49,000,000                                             62,000,000                                            239,000,000
Legal digital music services in the UK2                  Value of streaming market to British record labels2     Number of music tracks that have been shared          Number of tracks downloaded legally between
                                                                                                                 on Facebook                                           January and June 20121

51%                                                      68%                                                     54%                                                   50,900,000
Proportion of UK record label revenues accounted for     Proportion of people who believe search engines
by digital sales (Q3 2012)2                              should make it harder to find illegal music websites5   Proportion of music fans who prefer                   Forecasted number of cars with streaming facilities
                                                                                                                 to own downloaded music7                              to be sold every year by 201710

20,000,000                                               80%                                                     4,000,000                                             14.5%
Individual tracks available for licence                  Proportion of people who are aware
to legal digital services                                of streaming services4                                  Number of people regularly engaging in                Percentage of Brits using P2P networks to
                                                                                                                 filesharing in the UK3                                fileshare music4

BPI digital music nation 2013                                                                                    UK DIGITAL MUSIC AT A GLANCE                                                                                                          04 / 05
Digital music nation 2013
Music leads the charge   Innovation is the lifeblood of digital
                         music and the scale and speed of
                                                                                  Competition heats up in the streaming market
                                                                                  The US-based streaming service, Rdio, launched
in digital innovation    developments here in recent years                        in the UK adding web browser access alongside a
                         has been phenomenal. The UK is the                       range of apps, streaming integration for audio systems
                                                                                  and an Artist Program offering musicians a cut of
                         world’s most competitive digital                         subscriptions they drive. Deezer expanded into the
                         music market, with more than 70                          live music video streaming market and was bundled
                         legal services, catering for all                         with Everything Everywhere’s 4G mobile service at
                         different kinds of music fan.                            launch. A major revamp to Spotify’s service included
                                                                                  an enhanced recommendations engine, playlists
                                                                                  from musicians and celebrities, and notifications
                         Five digital highlights                                  when new music from favourite artists is released.
                         of 2012                                                  The Napster service was bought and relaunched by
                         Watershed moment for digital music                       Rhapsody, helping raise its profile in the UK market.
                         Q1 2012 saw a ground-breaking moment for digital         Digital radio manufacturer turns
                         music when revenues from downloads and streaming         to subscription
                         accounted for more than 50% of record label income
                                                                                  Digital radio manufacturer Pure brought its own Pure
                         for the first time in digital music’s history.
                                                                                  Music subscription service to music fans in the UK,
                                                                                  following on from its existing FlowSongs offering.
                         First official streaming chart
                                                                                  Users can stream content and tag tracks they hear
                         launches in the UK
                                                                                  on their DAB set to get more from that artist.
                         The growth and popularity of streaming was marked
                         in May 2012 with the launch of the UK’s first Official

                                                                                     DOWNLOADS
                         Streaming Chart, which collates data from both
                         ad-funded and subscription services.

                                                                                     UP LOADS
                         Cloud services fully launch in the UK
                         Cloud services launched by three of the biggest
                         digital players – Google, Amazon and Apple –

                                                                                     DIGITAL MUSIC
                         arrived in the UK offering consumers the opportunity
                         to access digital purchases remotely, stream stored

                                                                                     OUTSELLS CDs IN UK
                         content, and upload or scan-and-match music
                         files from their own collections.

                                                                                     FOR THE FIRST TIME!
                                                                                                                                      past the
                                                                                      A record number of downloads took digital sales
                                                                                      £1billion mark for the first time last year.
                                                                                                                                        d by
                                                                                      Streaming of music, films and video games rockete
                                                                                      11.4% and now make up a quarter of the market.

                         MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION                                                                            06 / 07
Digital music nation 2013
Music as a driver of social                                 Twitter followers: music artists dominate                                                             Genevieve Ampaduh
media engagement                                            social media networks                                                                                 Head of Digital Marketing
                                                            January 2013 – Followers (millions)
A cursory look at major digital entertainment platforms                                                                                                           Sony Music
and social media services shows how the global appeal                                                                                                             “Social media has changed the face of music marketing
of British music and its popular artists attracts huge
                                                            1. Lady Gaga
                                                                                                32.859                                                              forever. The ability for artists to reach out to their
audiences to many online businesses, helping them                                                                                                                   potential fans in every corner of the globe in real time
to achieve the traction they need to gain momentum
in a notoriously competitive environment.
                                                            2. Justin Bieber
                                                                                                32.647                                                              is incredibly powerful and cannot be replicated by
                                                                                                                                                                    traditional media.
Three of the top 10 most-liked pages on Facebook are                                                                                                               arly advocates of an artist have become an extension
                                                                                                                                                                  E
by musicians1 – Rihanna, Eminem and Shakira. Music
                                                            3. Katy Perry
                                                                                                30.962                                                            of the label’s marketing teams and play an invaluable
also leads the way on Twitter: the top four positions for                                                                                                         role in breaking artists in their local countries.
the most-followed people on the service globally are
claimed by musicians – Lady Gaga, Justin Bieber,
                                                            4. Rihanna
                                                                                                27.728                                                            Empowering super-fans should be a staple of any
                                                                                                                                                                  music marketer’s strategy, as should entertaining
Katy Perry and Rihanna.                                                                                    The power of social media                              fans. Why shouldn’t a marketing campaign be exciting,

1 At the time of writing in January 2013
                                                            5. Barack Obama
                                                                                                25.523     in breaking acts overseas                              memorable and fun? It should be. And if it is, fans will
                                                            Source: twittercounter.com                                                                            stay with you for the journey ahead.”
                                                                                                           One Direction’s harnessing of the power of social
                                                                                                           media played a significant role in securing the
                                                                                                                                                                  Mike Allen
                                                            All time most-viewed YouTube content
                                                            January 2013 – Views (millions)
                                                                                                           band’s huge worldwide fanbase, helping their debut
                                                                                                           album Up All Night to top the charts in the United
                                                                                                           States, Australia, Italy and many other territories.
                                                                                                                                                                  VP International Marketing UK
                                                                                                                                                                  warner Music UK
                                                                                                                                                                                                                                200,000
                                                                                                                                                                                                                                People participated in
                                                                                                                                                                  “Social media has emerged as a mission-critical activity     the challenges of the
                                                                                                           One innovative digital marketing campaign
                                                            1. P
                                                                sy – Gangnam Style
                                                                                                1,146.3    around the album featured a virtual character            in breaking artists internationally. While its impact may
                                                                                                                                                                                                                                One Direction campaign

                                                                                                           called 1Dcyberpunk and a story centred around            vary from market to market, it is only heading one way
                                                            2. J
                                                                ustin Bieber – Baby
                                                                                                819.4      a missing laptop, creating a “transmedia adventure”
                                                                                                           that went viral across Europe and America.
                                                                                                                                                                    everywhere you look, and that’s upwards. For artists
                                                                                                                                                                    such as Ed Sheeran and Birdy in 2012, social media          2.5M
                                                                                                                                                                    was the foundation on which their international             YouTube views generated
                                                            3. J
                                                                ennifer Lopez – On The Floor
                                                                                                638.1      One Direction was at the heart of the campaign
                                                                                                           rewarding fans on completion of a series of
                                                                                                                                                                    success was built. In the case of a well-established
                                                                                                                                                                    global act like Muse, it’s equally essential that
                                                                                                                                                                                                                                from the One Direction
                                                                                                                                                                                                                                campaign
Rihanna                              Justin Bieber                                                         challenges with an online album listening party,         communication is channelled directly to the fanbase,
                                                            4. E
                                                                minem – Love The Way You Lie
                                                                                                529.2      where new tracks were streamed to the online
                                                                                                           community. The band spent three to five hours
                                                                                                                                                                    with social media being a big component of that.
                                                                                                                                                                    The fans expect it, and rightly so.”
                                                                                                           a week creating videos of themselves thanking
                                                            5. L
                                                                MFAO – Party Rock Anthem
                                                                                                513.5      fans for joining them in the race to retrieve the
                                                            Source: YouTube                                laptop, discussing their favourite entries and
                                                                                                           enjoying some detective work.
                                                                                                           Over 50 days the campaign almost doubled
                                                                                                           traffic to One Direction’s website, attracting
                                                                                                           200,000 participants who completed 20
                                                                                                           separate challenges. It created 12 Twitter trends
                                                                                                           and racked up more than 2.5 million YouTube
                                                                                                           views, with 1DCyberpunk having her own social
                                                                                                           media following.

BPI digital music nation 2013                                                                             MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION                                                                                             08 / 09
Digital music nation 2013
Music central to YouTube’s appeal
Music also makes up a large percentage of plays and                                                                                                                                                          The album as App
videos on the most widely known and used streaming                                                                                                                                                           Calvin Harris, 18 Months
service, YouTube, which has a monthly UK audience                                                                                                                                                            Columbia Records/Sony Music
of 22m users. In November, Psy’s Gangnam Style                                                                                                                                                               Calvin Harris released his third studio album
became the most viewed video in YouTube’s history                                                                                                                                                            18 Months in October 2012. The challenge was
(passing 1bn views in late December 2012)                                                                                                                                                                    to encourage a single track-buying audience to
and the top five most viewed clips of all time                                                                                                                                                               engage with the full album.
are music videos.
                                                                                                                                                                                                             A week prior to the album’s release, the team
Music by British artists features prominently among                                                                                                                                                          worked with SoundCloud API and the album
the most popular videos on the service, with Adele’s                                                                                                                                                         artwork to create an interactive experience that
Rolling In The Deep having been viewed over 360m                                                                                                                                                             let fans listen to the album and directly affect
times and singles by One Direction and Jessie J also                                                                                                                                                         the visuals by using flyposters created in real
ranked near the top of the all-time chart. For many                                                                                                                                                          time from their tweets.
consumers, especially younger ones, YouTube is their
                                                                                                                                                                                                             They also created a free app for the iPhone and
primary digital music discovery and playback service.
                                                                                                                                                                                                             Android platforms that allowed fans to stream the
The sheer scale of its reach and the depth of material
                                                                                                                                                                                                             album it in its entirety for free, but only if they kept
available are helping to make on-demand cloud-based
                                                         experience on legal services and return to them rather                                 in 2011) have used the platform to reach fans. Perhaps       dancing – the app uses the accelerometer on
                                                                                                                    22M
streaming a daily occurrence for many consumers
                                                         than unauthorised platforms. Twitter is also flexing its                               the biggest players in gaming are now on the mobile          smartphones to detect movement. Fans were also
and serves as an important bridge to other
                                                         muscles here as a marketing and promotional platform                                   platform. Rovio’s Angry Birds franchise expanded in          able to unlock additional content upon scanning the
subscription services.                                                                                              YouTube’s UK monthly
                                                         for music. DJ Tïesto became the first act to live stream                               2012 with a Green Day-themed version of its wildly           album sleeve, using an image recognition feature.
                                                                                                                    audience
Social media for sharing and selling music               a full show over the service and Blur performed two                                    successful gaming brand to tie in with their release
Facebook, with its 1bn users around the world and        new tracks on the site in the summer of 2012 – ahead                                   of three consecutive albums.
Twitter, with more than 500m users, are proving
powerful and important partners for the music
                                                         of radio and TV plays. The use of Twitter hashtags
                                                         and global trending topics to reach new audiences are      1Bn
                                                                                                                    Views of Psy’s Gangnam
                                                                                                                                                The album as App
industry as new global platforms for releasing music.    increasingly important marketing tools for musicians.                                  The concept of the album as an app has continued
                                                                                                                    Style on YouTube in total
                                                                                                                                                to develop. The most famous example of this was built
The recent focus for such services has been on           The popularity of social games and bespoke                                             for Björk’s 2011-released album Biophilia. Through
creating opportunities for ‘frictionless sharing’
between users to encourage music discovery.
Facebook partnered with streaming services Spotify,
                                                         social networks
                                                         Some acts are looking to control the social network
                                                         experience with their fans more directly by building
                                                                                                                    500,000+
                                                                                                                    Lady Gaga fans registered
                                                                                                                                                the app, fans owning mobile phones or tablets
                                                                                                                                                downloaded not just the audio tracks but a whole host
                                                                                                                                                of multimedia content. From a central menu, the user
Deezer, and Rdio and launched its ‘Listen With’          their own platforms. Lady Gaga is the most well known      on her LittleMonsters.com   can access the individual tracks, each with stunning
button, and later its ‘Share Music’ option, allowing     of the acts to do so and her LittleMonsters.com had        social network              graphics and scrolling lyrics, as well as special features
subscribers to drag and drop music into fellow           over 500,000 members by August.                                                        such as games, essays, bespoke animations and even
users’ playlists.                                                                                                                               an introduction narrated by Sir David Attenborough.
                                                         Social media and mobile have helped to pick up
While some listeners create playlists simply to round    the slack following the decline in the appeal of                                       The possibilities of what the format can offer are
up all their current favourite tracks in one place,      console-based music gaming, particularly Rock Band                                     still being explored. As music consumption moves
there is solid evidence that they also encourage music   and Guitar Hero. Console games still attract big name                                  increasingly to portable devices, artists and labels
discovery: in one recent month on the Spotify service,   acts such as Katy Perry (e.g. her bespoke version of                                   will inevitably be considering the rich fan experience
10% of all the playlists streamed were created by        The Sims) but third-party Facebook app developers                                      they can offer around an album’s release.
someone other than the user and these streams            like Zynga are delivering mass audiences to artists.
accounted for 20% of the overall total. Functions        Both Enrique Iglesias (through CityVille) and
such as these help ensure users have a rewarding         Lady Gaga (through a bespoke version of FarmVille

BPI digital music nation 2013                                                                                                                   MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION                                                                            10 / 11
Digital music nation 2013
Artist apps driving
 fan engagement
 Play Guetta
 In late November 2012, the French DJ and
 Producer David Guetta launched Play Guetta –
 an interactive app available globally on Spotify
 which invites fans to come and “join the permanent
 party”. It is an innovative listening experience
 offering a deeper connection with David Guetta,
 his music and his other fans around the world.
 Guetta’s fans have made him a social media
 superstar with over 36m Facebook ‘Likes’ and
 close to 7m Twitter followers, culminating in his
 position as the most streamed artist on Spotify
 in 2012.
                                                           D2C turns the artist-fan relationship
 The Play Guetta app features:                             upside-down
 •    real-time global communal listening experience
     A                                                     As fans become increasingly used to connecting
     for fans.                                             with their favourite acts online, a new breed of
                                                           services has emerged to directly serve these needs.
 •    uilt in ‘World EQ’ powered by fans of David
     B                                                     D2C (direct to consumer) retailers such as Bandcamp
     Guetta in Spotify’s 20 territories, giving users      allow labels and artists to set prices for their products
     live info on engaged users’ locations.                and sell directly, with digital material available in high
 •    he first use of Soundrop directly integrated into
     T                                                     quality formats for audiophile fans.
     a stand-alone artist Spotify App.                     In a similar vein, Topspin helps content creators                                      Plan B
 •    sers can share their own snapshot of the World
     U                                                     with ecommerce, providing bespoke online solutions
     EQ at the time by clicking ‘Like’ or ‘Tweet’.         to help manage and tailor their offer, while fan-funding                               Working together:                                                 ore than 100,000 fans took part in the album’s
                                                                                                                                                                                                                   M
                                                                                                                        36M+                                                                                                                                            100,000
                                                                                                                                                                                                               •
                                                           sites such as Kickstarter and Pledge Music have                                        Traditional and Digital Media                                    launch party which was streamed live online via
 •    sers can subscribe to a playlist of ‘Trending’
     U                                                     enabled artists to turn to their fanbase to fund new
                                                                                                                                                  Plan B Ill Manors Launch                                         YouTube.
     party tracks from the Play Guetta app.                projects, with exclusives and limited edition                People who ‘Like’ David                                                                                                                         Number of fans taking
                                                           experiences as incentives.                                   Guetta on Facebook        Atlantic Records UK                                          •    nline, mobile and in-game advertising via PS3
                                                                                                                                                                                                                   O                                                    part in the live stream
 •    eal-time chat functionality and the ability to
     R                                                                                                                                                                                                                                                                  launch party
                                                                                                                                                  The launch campaign for Plan B’s latest album,                   and Xbox provided platforms for teasers and
     vote for songs to be played next in the Play
                                                                                                                                                                                                                   homepage takeovers on a host of music, games,
                                                                                                                        7M
                                                           Augmented Reality: the relationship                                                    Ill Manors, was borne out of a combination of traditional
     Guetta app.
                                                                                                                                                                                                                                                                        1
                                                           between music and visuals                                                              and digital media. Engagement with fans centred on               film and lifestyle forums.
 •    avid Guetta will now be able talk to fans within
     D                                                     The increased ownership of mobiles and tablets                                         five core elements.
                                                                                                                        People follow David                                                                    •    ans were given the opportunity to vote for their
                                                                                                                                                                                                                   F
     the Spotify app and using a #PlayGuetta hashtag       has opened up new avenues for communicating                  Guetta on Twitter                                                                                                                               Chart position of
                                                                                                                                                  •    ‘tweet to unlock’ campaign promoted via TV
                                                                                                                                                      A                                                            favourite album track on Facebook to win tickets
     via his official Twitter stream.                      with music fans. One new technology that is                                                                                                                                                                  Ill Manors on week
                                                                                                                                                      and online video pre-rolls where the hashtag                 to Plan B’s performance at the iTunes Festival.
                                                           increasingly being utilised by artists and labels                                                                                                                                                            of release in July 2012

                                                                                                                        1ST
 •    ewer fans can view the David Guetta
     N                                                                                                                                                #illmanorsalbum unlocked pre-released tracks.
                                                           is that of Augmented Reality (AR). Through                                                                                                          The combined impact of the various initiatives
     music catalogue aiding the discovery of his
                                                           bespoke apps used in conjunction with a device’s                                       •    ‘Tag London’ campaign where fans tweeted their
                                                                                                                                                      A                                                        resulted in 5.9m Facebook fans, 342,000 Twitter
     previous productions.                                                                                              David Guetta is the
                                                           camera, fans are able to view specially created                                            opinions on the social and political climate using the   followers, 8.3m YouTube views of new album
                                                                                                                        most streamed artist          hashtag #ILLMANORS which were later projected            content and a boost in sales.
                                                           visual content at specific locations or in conjunction       on Spotify in 2012
                                                           with certain products – this can take the form                                             onto the Houses of Parliament, Olympic locations
                                                           of special animations or exclusive videos.                                                 and other iconic London landmarks.

BPI digital music nation 2013                                                                                                                     MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION                                                                                                12 / 13
Digital music nation 2013
In conversation with                                        spread across the industry so that in a few years
                                                                                                                                          Cosmo Lush                                                  time access to music and the ability to licence and
                                                                                                                                          SVP Digital Business Development,                           to use music in the digital production process will
                                                                                                                                          EMI Music                                                   be much easier.

                                                                                                                                                                                                      What do you see as the next big thing for
                                                                                                                                                                                                      the industry?
                                                                                                                                                                                                      I think the next big thing that will impact the music
                                                                                                                                                                                                      industry is the proliferation of really smart devices
                                                                                                                                                                                                      on which people can and want to consume digital
                                                                                                                                                                                                      content. We in the music industry need to be ready
                                                                                                                                                                                                      and in a position to license and distribute our music
                                                                                                                                                                                                      across all those different types of devices because
                                                                                                                                                                                                      therein lies the seed of innovation and creativity
                                                                                                                                                                                                      around digital music consumption.
                                                                                                                                          In 2011, EMI launched its Open EMI
                                                                                                                                          initiative. Cosmo Lush, SVP Digital                         Where does social media fit in?
                                                                                                                                          Business Development at EMI Music,                          There’s no doubt that social media will continue to
                                                                                                                                          explains to BPI OpenEMI and the issue                       be at the heart of what we do in the digital world.
                                                                                                                                          of innovation for the industry.                             I think it’s particularly apt in the music world because
                                                                                                                                                                                                      music is all about fantastic artists and passionate
                                                                                                                                          Tell us about the Open EMI initiative.                      fans who want to engage with those artists and
                                                                                                                                          EMI launched Open EMI in 2011 with a view to                the music they create. Social media is all about
                                                                                                                                          fostering and supporting innovation in digital music.       connectivity, it’s about networks of friends and
                                                                                                                                          And at the heart of Open EMI is the concept of              family, and in many ways that’s the perfect
                                                                                                                                          sandboxes. We’ve joined up with a technical partner         environment to promote and sell music content.
The Rolling Stones
                                                                                                                                          called The Echo Nest to create secure environments
                                                                                                                                                                                                      What effect will new technologies have?

                                                                                                                                                                                                                                                                 “
Augmented Reality                                        “The album reveal created a real buzz on social                                  on the internet where developers can play with EMI’s
The Rolling Stones, GRRR!
The release of The Rolling Stones’ compilation album
                                                         media,” said Deborah Hyacinth, Vice President
                                                         of Digital Marketing at Universal Music Group,
                                                                                                                  24%                     rich music repertoire and experiment with products
                                                                                                                                          or services that they may be developing. They can
                                                                                                                                                                                                      The proliferation of new devices and new
                                                                                                                                                                                                      technologies paves the way for a whole variety
                                                                                                                                                                                                      of new formats. Whether it’s the app or some other
                                                         in a recent Music Week article about the campaign.
                                                                                                                  Click-through rate of   very quickly and easily publish those products in                                                                      I think the next big
Grrr! was accompanied by a bespoke AR app for use                                                                 The Rolling Stones      the most suitable digital environment or channel            as yet undiscovered format the opportunity is to take      thing that will impact
on mobile devices. Fans were able to use the app at      “The 50 cities stage adds another level of interaction   Augmented Reality app
                                                                                                                                          for their creation.                                         music and to add in a whole bunch of other content         the music industry is
3,000 locations in 50 cities around the world to bring   to this global campaign, giving fans that little bit                                                                                                                                                    the proliferation of
                                                                                                                                                                                                      and rich media to offer fans another way to engage
artwork from the album to life at famous landmarks,      extra to mark such a fantastic lifetime achievement.                                                                                                                                                    really smart devices
                                                                                                                                          Do you think it is fostering a mutual                       with music and to engage with artists. There’s all
with the added incentive of exclusive prizes for the     This pioneering use of mobile technology extends                                                                                                                                                        on which people can
                                                                                                                                          understanding between the music                             sorts of challenges around that from an economic
best photos shared. The app used Augmented Reality       The Rolling Stones’ reputation for innovation                                                                                                                                                           and want to consume
                                                                                                                                          and tech sectors?                                           and distribution point of view, but frankly those are
on artwork but also real buildings (such as Big          and imagination.”
                                                                                                                                                                                                      challenges that we relish. Our job is to work with
                                                                                                                                                                                                                                                                 digital content.”
                                                                                                                                          I hope so. The idea of Open EMI is to build stronger
Ben and Sydney Opera House) to allow fans to                                                                                              links – and more trusted links – between the music          developers and other partners across the media
unlock content. Developer Aurasma revealed that                                                                                           community, the developers’ community and the                space to bring those kinds of concepts to life
The Rolling Stones’ app had a click-through rate                                                                                          investment community who are putting money behind           in a way that is creative and compelling to our
of 24% – meaning users were engaging with it on                                                                                           the development of new digital services. I think it is      artists’ fans.
an extremely high level. This presents enormous                                                                                           a gradual process. It will take time and we need to be
opportunities to sell tracks and merchandise                                                                                              patient. But I have no doubt that it will accelerate over   To listen to the full interview with Cosmo,
via the app.                                                                                                                              time and that what we are doing here at EMI will            please visit www.bpi.co.uk

BPI digital music nation 2013                                                                                                             MUSIC LEADS THE CHARGE IN DIGITAL INNOVATION                                                                                             14 / 15
Digital music nation 2013
digital music’s                 The digital music switchover
                                A significant moment in the history of
                                                                                             Digital’s share of trade income
                                                                                             Quarterly and annualised (2008-2012)
tipping point                   the UK music business occurred in Q1
                                2012, when digital income accounted
                                for over half of all recorded music
                                income for the first time.                                   60%

                                This trend of digital dominance carried through into
                                Q2 and Q3, although sales figures suggest that Q4
                                will revert to a majority CD-based business, largely
                                due to the gifting market in the final two months of
                                                                                             50%
                                the year. The CD still has an important role to play,
                                but the continuing rise of digital is proof that consumers
                                are embracing its immediacy, convenience and breadth
                                of catalogue. The idea that digital is a ‘new’ or ‘niche’
                                format is finally coming to an end. It is the driving
                                format and, most importantly, a growing format.              40%
                                The singles market is now 99.6% digital (based,
                                for now, on paid downloads) and this has proved
                                an important testing ground for consumers, using                        Annualised
                                services like iTunes, Amazon MP3 and 7digital to
                                buy tracks. The corresponding rise in the singles
                                                                                             30%
                                market has been phenomenal – from 32.3m in
                                2004 to more than 183m in 2012. Digital has
                                revitalised the official charts.
                                In the albums market, almost a third of all albums in
                                the UK were sold digitally in 2012. This has risen to
                                more than 40% in early 2013 as consumers spend               20%
                                digital gift cards post-Christmas and enjoy music
                                on the latest smartphones and tablets.
                                Record labels’ digital income is drawn from a variety
                                of sources – à la carte downloads (iTunes, 7digital,
                                Amazon MP3), subscription downloads (eMusic),                10%
                                ad-supported music and video streaming (Vevo,
                                YouTube, Spotify, Muzu, we7), subscription streaming
                                (Spotify, Deezer, Rdio), games and ringtones.

                                                                                             0%

                                                                                                        Q1 '08

                                                                                                                 Q3 '08

                                                                                                                          Q1 '09

                                                                                                                                   Q3 '09

                                                                                                                                            Q1 '10

                                                                                                                                                     Q3 '10

                                                                                                                                                              Q1 '11

                                                                                                                                                                       Q3 '11

                                                                                                                                                                                Q1 '12

                                                                                                                                                                                         Q3 '12
                                                                                             Source: BPI Surveys

BPI digital music nation 2013   DIGITAL MUSIC’S TIPPING POINT                                                                                                                                     16 / 17
More than a quarter of Brits use legal                               Why use illegal when you can have legal?                     are no estimates made of past purchasing, just an            Filesharers only account for less than a fifth
music services                                                       % age groups                                                 accurate recording of spending patterns over time.           of overall music spend
Data from Kantar Worldpanel’s survey2 shows that                                                                                  The panel data demonstrated that filesharers spent
more than one in four (27.7%) people in the UK claim                 Using legal digital services only                            an average of £26.64, compared with £33.43                   Average spend
to use legitimate digital music services to purchase                 27.7% Total                                           100%   by legal-only consumers, refuting the popular                Filesharers                        Legal only
downloads or stream content. Encouragingly, this is                                                                               argument that filesharers are the heaviest
almost double the number of people (one in seven)                    31.4% Men                                                    spenders on music.                                           £26.64                             £33.43
who admit they use peer-to-peer (P2P) networks                                                                                    According to Kantar Worldpanel’s survey, legal users         % of total population
to fileshare.                                                        23.9% Women
                                                                                                                                  outnumber filesharers by a ratio of almost two to one        14.5% Filesharers                                           100%
                                                                     38.7% 13-19                                                  and their relative spend is much greater. Filesharers’
One in five consumers dedicated to digital                                                                                                                                                     27.7% Legal only
                                                                                                                                  recorded music expenditure constituted 16.3% of the
Data from Kantar Worldpanel3 reveals that almost                     44.2% 20-24                                                  market total in the period under review, while legal-only
one fifth (19.6%) of music consumers in the UK                                                                                    respondents accounted for 42.1%. Some surveys                % of total music spend
only buy digital.                                                    38.7% 25-34
                                                                                                                                  have suggested that filesharing encourages greater           16.3% Filesharers
While digital single sales continue to increase,                     34.6% 35-44                                                  purchasing because of the ‘discovery’ element.
it is digital albums that are driving the real growth                                                                             However, Kantar’s survey found that a large proportion       42.1% Legal only
                                                                     22.4% 45-54                                                  (44.8%) of filesharing respondents had bought no
in the download market overall.
                                                                                                                                  music in the past 12 months according to their               Source: Kantar Worldpanel Digital Music Survey 2012
First-time buyers of digital music gave two thirds                   15.7% 55-64
                                                                                                                                  individual purchase records.
(66.4%) of their digital music spend to album
                                                                     9.2% 65+
purchases in 2012. While services like Complete                                                                                   The kids are alright                                         13-24 year-olds spend most on digital music
My Album on iTunes are there to bridge the divide                                                                                                                                              % age group sales    Physical Music   Digital Music
                                                                                                                                  Digging further into the digital spend of music
between tentative single downloaders and album
                                                                     Filesharing                                                  consumers reveals to what extent age affects average
downloaders, these numbers suggest that new                                                                                                                                                    40%
                                                                     14.5% Total                                           100%   spend. Predictably, young people spend more on digital
converts to the online music market are increasingly

                                                                                                                                                                                                                35.3
                                                                                                                                  music than the older generation – who remain active
feeling confident enough to start downloading albums                                                                                                                                           35%
                                                                     17.2% Men                                                    in the CD market, as the graph shows. But they also
straight away rather than building a collection of
                                                                                                                                  spend most in total – a third more than any other
single tracks.                                                       11.8% Women                                                                                                               30%
                                                                                                                                  age segment.

                                                                                                                                                                                                                                                  25.3
Filesharers spend less on music                                      28.5% 13-19                                                  Although the majority of streaming users access music

                                                                                                                                                                                                                         23.9
                                                                                                                                                                                               25%
                                                                                                                                  on free, ad-supported tiers, a significant proportion

                                                                                                                                                                                                                                         21.8
than legal consumers

                                                                                                                                                                                                                                21.0
                                                                     26.5% 20-24                                                  (17.3%) now pay a monthly subscription according to
Appearing to debunk the common belief that filesharers                                                                                                                                         20%

                                                                                                                                                                                                                                  17.3
spend more on music than other consumers, Kantar                                                                                  Kantar Worldpanel.

                                                                                                                                                                                                              16.8
                                                                     22.4% 25-34

                                                                                                                                                                                                                       15.1
Worldpanel found that the average spend over a                                                                                                                                                 15%

                                                                                                                                                                                                                                           13.2
12-month period for professed filesharers was lower                  15.7% 35-44                                                  Four out of five people aware

                                                                                                                                                                                                                                                    10.3
than the spend of consumers who only use legal                                                                                    of streaming services                                        10%
                                                                     10.0% 45-54                                                  In 2004, the first UK download chart was launched
services. Kantar Worldpanel’s respondents diarise
their music purchases on an ongoing basis – there                    5.3% 55-64
                                                                                                                                  to reflect the changes in how fans were starting to buy      5%
                                                                                                                                  music and, as more consumers flocked to download
2 Kantar Worldpanel’s panel of 15,000 individuals were asked        2.7% 65+                                                     stores, it was eventually integrated into the full singles   0%
   to answer a series of questions relating to digital music                                                                      rundown. The UK’s first Official Streaming Chart –

                                                                                                                                                                                                               13-24

                                                                                                                                                                                                                        25-34

                                                                                                                                                                                                                                 35-44

                                                                                                                                                                                                                                          45-54

                                                                                                                                                                                                                                                   55+
   consumption in August 2012 and 12,184 panellists completed                                                                     launched in May 2012 – is, for now, a standalone chart
   it. All answers were demographically weighted to be nationally    Source: Kantar Worldpanel Digital Music Survey 2012
   representative of the UK population.                                                                                           but is proof that streaming is of growing importance
                                                                                                                                  for both the record business and consumers.                  Source: Kantar Worldpanel (12m ended September 2012)
3 Data from Kantar Worldpanel shows the purchasing trends
   of 15,000 demographically representative individuals in the UK.

BPI digital music nation 2013                                                                                                     DIGITAL MUSIC’S TIPPING POINT                                                                                                   18 / 19
Data from Kantar Worldpanel shows that four out of        High awareness of streaming services                         new music as appealing whilst other factors included          On a scale of 0-10, with 0 being not at all good value
five individuals in the UK have heard of at least one                                                                  the absence of adverts on premium subscriptions,              for money and 10 being extremely good value, to what
of the leading audio streaming services, with the model   68.8% Spotify                                         100%   mobile portability and sharing playlists.                     extent do you think that paying to stream music
worth close to £50m to labels, accounting for 15.2%                                                                                                                                  represents good value for money?
of their digital income.                                  63.8% Napster                                                Streaming services prioritise music discovery
                                                                                                                                                                                     30%
The move into downloading has helped pave the way         34.4% Last.fm                                                The popularity as well as the immediacy of downloading
                                                                                                                       is reflected in the charts each week with sales spikes

                                                                                                                                                                                                                                                      26
for consumers to migrate into streaming, especially as                                                                                                                               25%

                                                                                                                                                                                                                                        24
connected portable devices such as smartphones and        13.0% Deezer                                                 becoming quickly apparent after television performances
tablets are helping shift consumers’ expectations about                                                                or when songs appear in adverts, helped in no small           20%
                                                          12.8% We7                                                    part by music identification smartphone apps such
all digital and entertainment content, not just music.

                                                                                                                                                                                                                                             16
                                                                                                                       as Shazam and SoundHound which link through to                15%
                                                          11.7% Rdio
                                                                                                                       digital retailers. Shazam, for example, has revealed
Edinburgh most popular UK city for Spotify

                                                                                                                                                                                                                              11
                                                                                                                                                                                                                                   11
                                                          80.6% Any of the above                                       that around 9% of tagged tracks result in a purchase.         10%
Spotify, the streaming service, now has 20m active                                                                     Smartphone technology as well as 3G and 4G mobile
users globally, of which 5m are paying subscribers.

                                                                                                                                                                                                                                                  7
                                                          Source: Kantar Worldpanel Digital Music Survey 2012
                                                                                                                       networks have helped enormously in harnessing such            5%
The company also revealed at the start of December                                                                     impulse purchases.
2012 that it has paid out over $500m to rightsholders

                                                                                                                                                                                                                          2
                                                                                                                                                                                                    0 1
                                                                                                                                                                                     0%

                                                                                                                                                                                                           10
                                                                                                                                                                                                                20
                                                                                                                                                                                                                     30
since it launched.                                                                                                     Social discovery is now a significant part of digital music

                                                                                                                                                                                                                          4
                                                                                                                                                                                                                              5
                                                                                                                                                                                                                                   6
                                                                                                                                                                                                                                        7
                                                                                                                                                                                                                                             8
                                                                                                                                                                                                                                                  9
                                                                                                                                                                                                                                                      10
                                                          The most popular UK cities for Spotify
                                                                                                                       and in August 2012 Facebook revealed that 62.2m
Spotify’s own research reveals that per capita usage                                                                   tracks have been shared 22bn times through its Open           Source: YouGov SixthSense Music 2012 report
of the service in the UK is highest in Edinburgh and                                                                   Graph since September 2011. Meanwhile, the number
Cardiff, with London being fourth. This shows that                                                                     of playlists created on Spotify to date has now
the reach and the appeal of streaming now extends                                                                      surpassed 1bn and services such as ShareMyPlaylists           Motivations for subscribing to music services
across the country and is growing fast nationwide.                                                                     have tapped into this trend.                                  % subscribers

Music fans rate streaming services very highly                                                                         Rdio and the new Myspace also place social discovery          40% To access an unlimited music collection                      100%
                                                                                     1 Edinburgh                       at the heart of their offerings and standalone services
EMI Music’s Consumer Insight Department interviewed                                                                                                                                  36% To listen to music I already know
                                                                                                                       such as This Is My Jam are driven entirely by social
over 1,100 users of music subscription services in
                                                                                                                       discovery and recommendation. Whilst some consumers
September 2012.                                                                                                                                                                      35% To discover new music before I buy it
                                                                                                                       may feel overwhelmed by choice, the role of playlists
Customer satisfaction with the current range of                                                                        and recommenders (DJs, journalists, pop stars) on             33% To use it on my phone
services was extremely high, with 93% of users stating                                                                 services are helping to make this easier through
their satisfaction – or perhaps of more interest, only                                       7 Sheffield
                                                                                                                       expert curation.                                              30% No advertisements
                                                                                              9 Nottingham
6% of users saying they were displeased with the
                                                                                              6 Leicester                                                                            24% Not to be limited by free music service restrictions
service they were currently signed up to.                                                   8 Coventry
The findings were bolstered by the YouGov SixthSense                                                                                                                                 22% As a complete music experience
                                                                                    2 Cardiff 4 London
Music 2012 report which showed that more than a
                                                                                      5 Bristol                                                                                      22% To use it when not connected to the internet
quarter of users would give streaming services full
                                                                               Southampton 3 10 Brighton
marks for value for money with 73% giving them                                                                                                                                       20% To listen to music before it’s out for sale
seven out of 10 or better.
                                                                                                                                                                                     17% To get access to friends’ playlists or share music
For EMI respondents, the biggest draw was having          Source: Spotify
access to an unlimited music catalogue (40%) while                                                                                                                                   17% To subscribe to playlists
just over a third (36%) cited being able to listen to
music they already know as an important attraction.                                                                                                                                  Source: EMI Insight
Similarly, more than a third (35%) cited discovering

BPI digital music nation 2013                                                                                          DIGITAL MUSIC’S TIPPING POINT                                                                                                         20 / 21
“
Music ownership favoured over access                           Top 20 most streamed tracks                                                  In conversation with                                       Do you think the future of the album could
Music fans are experiencing choice and flexibility like        January-October 2012                                                         Paul Smernicki                                             be a downloaded app?
never before. With access to more than 20m tracks                                                                                           Director of Digital,                                       I think the way people talk about apps is a bit of a
                                                               Streams Sales Artist                  Title                                                                                             red herring. I think what we need to deliver is a great   My focus would always
online, subscription services are particularly appealing                                                                                    Universal Music UK                                                                                                   be on the experience
to music obsessives, who can hear all the new releases         1         1       Gotye               Somebody That I Used To Know                                                                      experience – either in the form of an app/desktop         as opposed to the
and delve deep into catalogue. But according to the            2         2       Carly Rae Jepsen    Call Me Maybe                                                                                     application or a digital experience to take into a live   digital product.”
YouGov SixthSense Music 2012 report, the majority                                                                                                                                                      event. My focus would always be on the experience
                                                               3         3       Fun.                We Are Young – feat. Janelle Monáe
of fans (54%) still want to own downloaded music                                                                                                                                                       as opposed to the digital product.
with only 9% saying they prefer access over ownership.         4         4       David Guetta        Titanium – feat. Sia
                                                               5         5       Nicki Minaj         Starships – Explicit Version                                                                      Is the car the final frontier for digital
This is partly a question of familiarity with the model,                                                                                                                                               music?
and reflects the high value that UK music fans say             6         7       Flo Rida            Wild Ones – feat. Sia
                                                                                                                                                                                                       The car and the living room – neither have been
they place on music ownership. But it also reflects            7         48      Rihanna             We Found Love                                                                                     nailed. The Holy Grail is how to give someone a
one advantage of the à la carte model that is often                                                                                                                                                    completely seamless musical experience that just
                                                               8         13      Alex Clare          Too Close
understated – the ability for consumers to pay for                                                                                                                                                     follows them around. Layering an experience on
music only when they really want it. Research shows            9         6       Jessie J            Domino                                 How have you seen the industry change                      top of music is where we in the industry can be
that most UK consumers are hesitant about taking               10        15      Train               Drive By                               in the last 10 years?
                                                                                                                                                                                                       innovative and there is great music intelligence out
on new contracts. The combination of these factors             11        32      Jay-Z               Ni**as In Paris                        When I think about my job and the bits of the business     there to help us to do so. I want to be able to tell
means that the à la carte model is likely to appeal to                                                                                      I deal with every day, they didn’t even exist 10 years     my car where I’m going and for it to devise a playlist
                                                               12        54      Drake               Take Care
a large number of UK music fans for a considerable                                                                                          ago. Things that seemed like a bolt-on not so long ago     to last the journey based on my musical tastes.
time. It may be that the hybrid approach, where                13        57      Ed Sheeran          Drunk                                  – such as mobile site optimisation or even iTunes and      That’s the future that will take people to a whole
streaming services also offer downloads, could be              14        10      Flo Rida            Whistle                                certainly concepts like subscription models – are now      new digital immersion level.
an important handrail for music fans who are open                                                                                           not only part of our everyday language and business
                                                               15        23      David Guetta        Turn Me On – feat. Nicki Minaj
to experimenting with the access model.                                                                                                     but amongst the most important areas of what we do.        What’s the next big thing for
                                                               16        35      Coldplay            Paradise                               It’s phenomenal.
Overall, the next transition phase for the music industry                                                                                                                                              the music industry?
                                                               17        101     Ed Sheeran          The A Team
will not be the move from physical to digital but rather                                                                                                                                               I’d love to see a music service without a front end
                                                                                                                                            Do you think that music will become a wholly               where you subscribe to the architecture that delivers
the move from digital ownership (MP3s and other                18        68      Ed Sheeran          Lego House
                                                                                                                                            digital business?
digital files) to digital access (streaming from the cloud).   19        11      Rudimental          Feel The Love – feat. John Newman                                                                 the music. As an industry it is very hard for us to
                                                                                                                                            I think there will always be demand for a tangible         look very far into the future but I think we should –
Services like YouTube and SoundCloud (which now                20        66      Skrillex            Bangarang – feat. Sirah                product but that overall the demand for it will continue   both for the near-future trends and the trends that
has 180m users globally) are helping to push the idea                                                                                       to diminish. There are bits of our business that might
                                                               Source: Spotify                                                                                                                         may be 10 years from now.
of access-based music into the mainstream. It will be                                                                                       surprise people: we have a vinyl boxset store that does
a slow and steady build, but these companies are                                   The five most streamed tracks are exactly the            really well and we have a direct-to-consumer store         Listen to Paul’s thoughts on the future
helping to normalise access to music this way and                                  same as the top five sales hits in 2012 in the UK        where we reissue great albums from our catalogue on        of digital music at www.bpi.co.uk
make that transition for consumers easier.                                         Official Singles Chart. But beyond this there are        vinyl. But, overall, I think the pendulum will continue
                                                                                   interesting differences to note in how streaming         to swing towards digital.
                                                                                   compares to downloading.
                                                                                   Artists with a younger fan base dominate the 20
                                                                                   most streamed tracks. Ed Sheeran’s audience,
                                                                                   for example, is highly digitally engaged, following
                                                                                   extensive digital marketing and social networking
                                                                                   initiatives such as his crowd-sourced video for
                                                               Ed Sheeran          Give Me Love and his 4m followers on Twitter.
                                                                                   This is reflected in the fact that he has three of the
                                                                                   top 20 streams of the first ten months of 2012.

BPI digital music nation 2013                                                                                                               DIGITAL MUSIC’S TIPPING POINT                                                                                                        22 / 23
THE CHALLENGE                   Piracy in the UK remains at a high level
                                with 7m individuals visiting sites that
                                                                                             BitTorrent and legal downloads compared
                                                                                             January-June 2012
OF ILLEGAL FREE                 offer content illegally each month.
                                Despite innovation in the online market
                                for music, new services still have to
                                compete with websites and services
                                                                                             Legal
                                that attract potential customers away                        downloads
                                because they offer music illegally
                                for free.                                                    41%
                                Data from UKOM/Nielsen – who measure actual
                                website usage monthly – shows that around 7m
                                individuals in the UK use at least one service
                                where content is hosted illegally each month,
                                from peer-to-peer (P2P) networks and cyberlockers
                                to stream-ripping applications and unlicensed
                                streaming services.

                                Illegal locker access on the decline
                                In recent months, some of the most popular services
                                used for infringement have seen a significant drop           BitTorrent
                                in users, largely as a result of the shutdown of the         downloads
                                locker site Megaupload at the beginning of 2012.
                                Before its closure, Megaupload had more users than
                                any other locker site in the UK, averaging 1.3m each
                                                                                             59%
                                month in 20114 and reportedly up to a staggering 50m
                                per day around the world. In the wake of its closure,
                                Filesonic discontinued its rewards programme and
                                disabled the sharing functionality. As a result, user
                                numbers drastically reduced from almost half a million
                                in January to 216,000 the following month, dropping
                                further to fewer than 100,000 in May5.
                                The Swiss-based locker site RapidShare followed
                                suit by slowing speed of access for its free tier users
                                in a bid to hamper unlawful usage. Hulkshare, sold to
                                Israeli investors in 2011, undertook a complete revamp
                                of the site to become a legitimate music proposition
                                for digital music fans. UKOM/Nielsen’s data shows
                                that in the UK at least 1.5m people are still using locker
                                services each month, down from 2.5m recorded in
                                the latter part of 2011.
                                4,5 UKOM/Nielsen
                                                                                             Source: Musicmetric / Official Charts Company

BPI digital music nation 2013   THE CHALLENGE OF ILLEGAL FREE                                                                                24 / 25
P2P growth contained in 2012                                  Surveys show overwhelming support                                                           Government should take a stronger
                                                                                                                             345M
                                                                                                                                                                                                                           BPI has sent more than 7m takedown
BitTorrent and P2P remain the most popular methods            for site blocking                                                                           stance on piracy                                                 requests to Google
of obtaining copyrighted material illegally, with around      The prevention of access to sites hosting illegal content                                   Research strongly suggests that there is an expectation
                                                                                                                             Tracks illegally
                                                              has some precedent in the UK in the actions against                                         upon government to take a firmer stance on action
4m people in the UK using them each month6.
In February, torrent indexer BTJunkie voluntarily             Newzbin and The Pirate Bay. Support for this course
                                                                                                                             downloaded via Bit Torrent
                                                                                                                             in first half of 2012        against piracy.
                                                                                                                                                                                                                           1. Degban
                                                                                                                                                                                                                             (Copyright protection
                                                                                                                                                                                                                                                            12,931,064
closed its services in response to the actions being          of action is solid.                                                                                                                                            company)
                                                                                                                                                          •   60% of respondents to the AudienceNet survey7

                                                                                                                             239M
taken against The Pirate Bay and Megaupload. Also
in February, the High Court ordered UK ISPs to block
                                                              •    ver half (56%) of respondents to a 2012
                                                                  O
                                                                  AudienceNet survey7 agreed that sites which
                                                                                                                                                              believe government should prevent companies from
                                                                                                                                                              advertising on sites that distribute music illegally, with
                                                                                                                                                                                                                           2. RIAA
                                                                                                                                                                                                                             (Recording Industry
                                                                                                                                                                                                                                                            8,652,049
access to The Pirate Bay and from April 2012 the                  distribute music illegally without paying artists          Tracks legally downloaded        the same percentage agreeing that it should do more            Association of America)
blocks were implemented. According to UKOM/Nielsen                should be blocked or closed down.                          via iTunes, Amazon and           to support jobs in the creative sector by taking action
data, usage of the site has plummeted by over 70% as
                                                                   2% of filesharers agreed that the blocking of a
                                                                  4
                                                                                                                             other licensed services          to stop unauthorised downloading.
                                                                                                                                                                                                                           3. BPI
                                                                                                                                                                                                                             (British Recorded
                                                                                                                                                                                                                                                            7,558,610
a result. In December, Pirate Party UK was forced to          •                                                              in first half of 2012                                                                           Music Industry) Ltd
remove its proxy giving access to The Pirate Bay.                 site would stop them acquiring infringing content8.                                     •    similar proportion (61%) feel government should do
                                                                                                                                                              A
                                                                                                                                                              more to educate the public about the law surrounding         Source: Google Transparency Report

                                                                                                                             42%
However other applications and services such as
Kickass Torrents and Torrentz have picked up users.           Show us the legal sites, say consumers                                                          illegal downloading.
                                                              Search engines play an important role in directing                                          BPI, in partnership with other creative sectors, is
                                                                                                                             Filesharers agreed
345m tracks illegally downloaded via                          consumers towards online music sites. At present,              that the blocking of a       building a partnership with the internet advertising
BitTorrent in first half of 2012                              consumers encounter a confusing world of search                site would stop them         industry’s Digital Trading Standards Group, assisted
Monitoring service MusicMetric’s first Digital Music          results where blatantly unlicensed sites are often listed      acquiring infringing         by the National Fraud Intelligence Bureau (NFIB), to
Index report estimated that over 43m downloads were           much higher than trusted brands like Amazon and                content
                                                                                                                                                          encourage advertisers to stop promoting their goods
made via BitTorrent alone in just the first six months        iTunes. Consumers do not welcome this situation.                                            and services on infringing sites.
of 2012. Of these 78% were albums and 22% single
tracks, equating to 345m tracks downloaded illegally
via BitTorrent. Over the same period 91.7m tracks and
                                                              •    wo thirds (66%) of respondents in an AudienceNet
                                                                  T
                                                                  survey7 of 2,000 adults believe search engines should      70%                          BPI and IFPI already work with the City of London
                                                                                                                                                          Police and the NFIB to ensure that payment providers,
                                                                  direct people to legitimate sites ahead of illegal ones.   Reduction in UK Pirate
                                                                                                                                                          including the major credit card companies, do not
14.7m albums were downloaded from iTunes, Amazon                                                                             Bay users following
and other licensed services, which equate to 239m             •    ore than two thirds (68%) of respondents to a
                                                                  M                                                          blocking order obtained      support illegal sites by processing payments for them.
tracks (using a ratio of one album to 10 tracks).                 Harris 2011 study agreed that search engines should        by BPI
                                                                  make it harder to find websites that offer music                                        Music Matters: helping promote legal services
In other words, legally purchased tracks still represented        illegally, with 63% of pirates concurring.                                              With more than 70 legal digital music services for fans
less than half the number of tracks downloaded in total                                                                                                   in the UK to choose from, and a host of illegal sites
from legal sites and BitTorrent – and this does not           During 2012 BPI worked hard to remove illegal listings
                                                                                                                                                          that can confuse them, it isn’t always easy for
include all the tracks sourced illegally from locker sites,   from Google’s search results, and to persuade Google
                                                                                                                                                          consumers to keep up to date with the services that
other P2P protocols, stream rippers, illegal paysites,        to demote sites that are the subject of Digital Millenium
                                                                                                                                                          are best for them. To help music buyers, BPI – in
blogs and forums.                                             Copyright Act (DMCA) notices. In August, Google
                                                                                                                                                          partnership with artists, retailers, songwriters, record
                                                              announced that it would do this. So far the impact
                                                                                                                                                          labels and managers – launched Music Matters to
Creating breathing space for legal services                   appears to be very limited, but BPI is working with
                                                                                                                                                          highlight where music can be bought safely and legally
Illegal downloading is holding back the digital growth        Google to monitor the results and arguing that it must
                                                                                                                                                          online. The Music Matters badge features on a host
not just of music, but also of other creative sectors like    do more to live up to the commitment it made. BPI’s
                                                                                                                                                          of digital services to tell fans that the sites are authentic
publishing, sport, TV and film. None of them can ignore       Anti-Piracy Unit issues millions of notices to Google
                                                                                                                                                          and, importantly, that musicians are paid when their
the challenges of piracy. So creators and rights owners       and infringing sites to request the takedown of
                                                                                                                                                          music is purchased or streamed. Check out
have developed a range of initiatives designed to             members’ repertoire which is being hosted illegally.
                                                                                                                                                          www.whymusicmatters.org
reduce filesharing. With usage of unlawful services           In 2012, BPI sent over seven million delisting notices
so widespread, it might be assumed that action against        and will work towards establishing partnerships with                                        6 UKOM/Nielsen
such activity would not be widely supported by the            other leading search engines in 2013.                                                       7 AudienceNet Survey on Music Downloading, May 2012
                                                                                                                                                          8 EMR/Wiggin 2012 Digital Entertainment Survey
general public. Research, however, contradicts this view.

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“                                                                                                                                               “
In Conversation with                                        How important is 4G to digital developments?                                         In Conversation with                                       accessible across all platforms (PC, mobile, in the
Ole Obermann                                                I think that 4G is an opportunity. What we’re seeing                                 Leanne Sharman                                             living room via the TV and in the car). We will also
SVP International Digital Business,                         now is that if you build a service that is compelling,                               VP and MD Digital Strategy and Business                    see more packages being added to broaden their
                                                                                                                     Over the last 12                                                                       appeal and suit the listening habits of a wider          Our focus is the
Sony Music Entertainment                                    it can win out against piracy. Once 4G really lines      months our top 30           Development, EMEA – Warner Music Int.                                                                               development of
                                                            up with the right devices and we have an ecosystem                                                                                              audience. In the UK we can look to the launch
                                                                                                                     active UK artists have                                                                                                                          long-term careers
                                                            that works perfectly, I think it’s a massive             provoked 1.8 billion                                                                   of new interactive digital radio services. These will    for our artists, which
                                                            opportunity. With the music experience becoming          online interactions                                                                    offer a new means to access music and provide            means building and
                                                            more visual over time you need faster speeds for         over online and social                                                                 a fantastic platform to introduce fans to new tracks     sustaining a real
                                                            delivery of images, videos and other content. 4G         media – that’s more                                                                    and artists. Furthermore, as global digital players      connection with
                                                            allows that aspect of a digital music service to grow    than the population                                                                    launch in new countries we’ll see new territories        their fans.
                                                            and flourish.                                            of China and USA                                                                       becoming increasingly important music markets.           In order to fully
                                                                                                                     combined.                                                                                                                                       harness the power
                                                            Do you think the app could become                        There is no other                                                                      How can the music industry take advantage                of the numerous
                                                            the album format of the future?                          business that can claim                                                                of faster connectivity (superfast broadband              music and social
                                                            I think that’s a good way to think about it but it       this level of consumer                                                                 and 4G)?                                                 media platforms at
Where do you think the next growth wave                                                                              engagement – music          How have you seen the music industry change                I’m really excited about 4G. It means faster access      our disposal, we have
                                                            comes down to defining what an app is over time.                                     over the last 10 years?
for digital music services will come from?                                                                           is first and foremost                                                                  and hopefully that means digital music will become       integrated digital
                                                            I think the experience of enjoying an album in the       a passion and an                                                                                                                                expertise throughout
Right now there are a few big themes that we see                                                                                                 We have experienced a phenomenally exciting evolution      more of a mass market offering.
                                                            digital world should be really interactive with access   incredibly powerful                                                                                                                             the company, from
in the music industry.                                                                                                                           in the way people discover, access and listen to music.
                                                            to lyrics, cover art, video content, and interviews      medium to make long                                                                                                                             marketing and
                                                                                                                                                 There have been a number of game changers in the           What do you think the next big thing
There is a huge opportunity for digital interactive radio   with the artist – and if the app becomes the             lasting audience                                                                                                                                promotion to business
                                                                                                                                                 last ten years. Technology has continued to develop        is for digital music?
services. If you think historically about how people        package to bring that all to the consumer then           connections.”                                                                                                                                   development and
                                                                                                                                                 apace and today there are many devices that people         I think that what is important today is what will be     commercial.
have consumed music in the past, about half of the          the app becomes the album.                               Nick Gatfield, Sony Music
                                                                                                                     UK Chief Executive.
                                                                                                                                                 can use to listen to a large volume of music on the        important tomorrow – and that is the access model
population were proactive buyers of music. But the                                                                                               go. Simultaneously we have seen the successful                                                                      Developing those
                                                            How critical is social media to promoting                                                                                                       and the evolution of bundled subscription services       skills across the
other half of the population listened to music in a                                                                                              development of new commercial music models,
                                                            and selling music?                                                                                                                              within mobile operator plans. I’m also excited about     entire organization
passive way, mainly through radio. So I think that                                                                                               with streaming and download stores that offer people
                                                            Social media is a very integral part of how we                                                                                                  the roll-out of services to new territories as well as   means we can create
more personalised and interactive radio-type                                                                                                     instant access to millions of songs – whether they just
                                                            market and promote music now and in the future                                                                                                  new models entering emerging markets. Plus I think       more opportunities
services represent a huge untapped area for us.                                                                                                  want to listen to them once, create a streaming playlist
                                                            – and creating awareness around an established                                                                                                  offering music to a mass market audience at an           than ever before,
The mass distribution of music streaming services                                                                                                or purchase them to own. As a result, I think it is fair   entry-level – be that via interactive radio or other     delivering compelling
                                                            artist who has new material out in the market or a
is also just getting started. In my opinion, every                                                                                               to say that digital is at the forefront of everything we   models in discussion today – will be where the           consumer experiences
                                                            developing artist who is phenomenal and we want                                                                                                                                                          and helping to fulfil
connected device, broadband provider, and mobile                                                                                                 do today in the music industry. We now have digital        music industry is going.
                                                            everyone to know about that artist, social media                                                                                                                                                         the potential of each
carrier should give a user the option to have a                                                                                                  experts who are involved in all aspects of our business
                                                            will be a big part of the mix.                                                                                                                                                                           individual act.”
comprehensive music experience. We’ve seen this                                                                                                  because it is vital that we continue to work with          What lessons have we learnt and
start to happen but it is really going to grow in the                                                                                            innovative new technology and services to ensure           what advice can we give to the other                     Christian Tattersfield,
                                                            To listen to the full interview with Ole,                                                                                                                                                                CEO Warner Music UK &
next couple of years.                                                                                                                            consumers can enjoy a high quality music experience        creative industries to help them on
                                                            please visit www.bpi.co.uk                                                                                                                      their digital journey?
                                                                                                                                                                                                                                                                     Chairman Warner Bros.
                                                                                                                                                 and connect with their favourite artists.
International expansion is also a very big topic right                                                                                                                                                      The music industry has evolved at a significant pace
now. We’ve never really had the retail infrastructure                                                                                            Where will the growth in digital services                  and it has been unbelievably important to keep on
to sell our physical product in markets around the                                                                                               come from?                                                 top of technology, stay close to it and develop music
world but with digital services you literally have a                                                                                             There will be the evolution of existing services. Access   services in line with the capability of the latest
billion people on some continents with a connected                                                                                               is, and will continue to be, an important consumption      offerings. You need to understand your consumer
device. And all of a sudden we can give them a                                                                                                   model and we expect to see it grow in a few ways.          and what they want, then try to put together
music experience they would never have been able                                                                                                 Current services will see an increased customer base       services to meet that demand.
to get before.                                                                                                                                   when mobile operators and ISPs bundle them in with
                                                                                                                                                                                                            To listen to the full interview with Leanne,
                                                                                                                                                 their offerings. They will also be developed to be
                                                                                                                                                                                                            please visit www.bpi.co.uk

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