THE music industry has always claimed it is immune to recession. But this time it’s different, warns Sandy Monteiro, chairman of the Recording Industry Association of Malaysia (RIM).
“This current situation is unprecedented. This economic slowdown is far bigger than we’ve ever seen before. It would be foolish to think that any industry, including music, is not being affected,” he said.
The International Federation of Phonographic Industries (IFPI) annual report, released last month, echoes this sentiment.
IFPI chairman John Kennedy said in the report that the music industry goes into 2009 under “the uncertain cloud of a global downturn.”
IFPI is the organisation that promotes the interests of the international recording industry worldwide. Its membership comprises some 1,400 major and independent companies in more than 72 countries.
Last year, the digital music business internationally grew by around 25% to US$3.7bil (RM13.3bil). But 2009 looks to be a different story with no growth projections.
Still at early stages
The United States is the world leader in digital music sales, accounting for 50% of the global digital music market value.
Malaysia’s digital music market is not as sophisticated when compared to that in the West. Nine years into the new millennium, there is still no sign of a digital download retail store here that has the size and popularity of iTunes.
There was TM’s Blue Hyppo service, which is no longer functioning, and there is the Media Prima Group’s Guamuzik, which industry sources say, is selling modest amounts of songs per month.
Digital music accounts for only 30% of the local music market, according to RIM. The bulk of digital music revenue comes from Ring Back Tones (RBTs).
RBT is a particularly Asian phenomenon; it accounts for nearly 90% of digital music revenue in Malaysia. RBT is the song you hear when you call someone else’s phone instead of the usual “toot-toot” tone.
RBT will still lead this year because it’s the only music format that consumers can’t have for “free.” “You can’t pirate a RBT,” explained Monteiro.
But the industry expects local growth for digital music to be flat this year because introducing services beyond RBT will be difficult. “Initially, we targeted a 25% growth for digital music. That projection will be under pressure this year. We’ll be happy just to maintain it, with no growth,” said Monteiro.
Ray of light
Lim Kong Thien, head of infotainment at DiGi Telecommunications (Malaysia) Sdn Bhd, is a bit more optimistic.
“With the availability of more devices and ease of distribution, we believe the digital music market, which includes both full tracks and ringtones, will continue to grow despite economic uncertainties,” he said.
“To date, we have not seen any (negative) impact on this segment. Music is universal and we expect users to continue to consume music,” he said.
Maxis Communications Bhd and Celcom Sdn Bhd, the other telecommunications leaders, could not respond by press time.
Despite the gloom, the industry players intend to push for growth.
“Growth is possible and not out of the question,” said Monteiro. “The industry can look at more interesting services and offer consumers more value for their money.”
“There could be “buy one, get one free” offers, and the music labels could work with device manufacturers to offer free songs with device purchases, like Nokia phones,” he said.
Kennedy said in the IFPI report that record companies are building an economic future based not just on selling music but on monetising consumer access to it.
“Nokia’s Comes With Music service, launched in October 2008, embodies that concept, with music free and unlimited, bundled into the cost of a mobile phone,” he said.
Johan Nawawi, chief executive officer of digital music services provider NuMuzik Sdn Bhd said: “I think digital music will grow in terms of people downloading it, whether its legal or not depends on the benefits to consumer.” Nawawi said music producers and retailers will have to find the “perfect” balance of right price and benefits.
The music kiosks
RIM has tried to encourage legal digital music consumption over the years, outside the RBT sphere.
There are about 10 kiosks in shopping centres in the Klang Valley which give you an option to customise your CDs, at about RM3.50 per song, according to RIM.
However, Adrian Wong, managing director of Sony Malaysia said the kiosks in the music shops are “not happening.”
“People don’t walk into a CD shop to download music, they walk in to buy CDs. People are not used to going to a PC to buy a song,” he said.
Monteiro said that RIM hasn’t publicised the kiosks effectively but still feels the kiosks have potential.
“Music has taken a backseat in people’s minds at the moment. There will come a time when everyone will be buying music at kiosks and we must have the infrastructure ready. We still sell thousands of tracks a year at these kiosks in the Klang Valley alone,” said Monteiro.
RIM has also placed another 300 music kiosks nationwide that offer full song downloads and ringtones for handphones. These kiosks are located in popular mobile phone shops.
“But most people still don’t know there are legal downloads available,” countered Wong.
On another sad note, the IFPI has reported that 95% of all music downloaded worldwide from the Internet is illegal. It said the music industry’s toughest challenge is to generate commercial value in an environment dominated by the availability of unlicensed, free music.
The IFPI estimates that more than 40 billion files were illegally shared last year, racking up a piracy rate of about 95%.
Kennedy said in the report that the vast growth of unlawful filesharing threatens to put the whole music sector out of business.
The music industry must take its inspiration from illegal download services and stop railing against filesharers in an effort to win profits, said Geoff Taylor, chief executive officer of the British Phonographic Institute (BPI), according to the Midem website.
Midem is the largest music trade show in the world. Speaking at the annual MidemNet music conference in Cannes last month, Taylor reportedly said that talks between record labels and Internet service providers (ISPs) are “the future.”
The local music industry is waiting for the right time to talk to the Government on ISP co-operation and hopes to do so by mid-year.
Monteiro said that when the music industry in Europe worked with its respective governments, illegal activity dropped by 70%.
“Whenever a user visited a illegal or P2P site in the European Union, a warning notice would pop up on the screen, warning that his or her activities were being monitored,” he said.
French ISPs, for example, would also write to persistent copyright abusers to educate and warn them about their actions, and as a last resort would sanction them with loss of Internet access for between one and 12 months, according to the IFPI report.
A report by Britain-based Entertainment Media Research, suggests that seven in 10 (72%) British music consumers would stop illegally downloading if told to do so by their ISP.
Another report by Paris-based research firm Ipsos, states that seven in 10 (74%) French consumers agree Internet account disconnection is a better approach than fines and criminal sanctions.
The IFPI said New Zealand will start requiring ISPs to implement a policy of terminating the accounts of repeat infringers this month. Governments are also being involved in discussions on the issue in the United States, Italy, Australia, Japan, Hong Kong and South Korea.
IFPI’s Kennedy said in the report, Governments are beginning to accept that, in the debate over “free content” and engaging ISPs in protecting intellectual property rights, doing nothing is not an option if there is to be a future for commercial digital content.”
As long as there are free songs to be had on illegal sites, the music industry will have a tough time growing. “People now just want to listen to music without having to pay for it,” said Wong. “I don’t know when this mindset will change.”
Not over the next 10 months, by the looks of it.