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Last Updated: Thursday, 26 June, 2003, 09:23 GMT 10:23 UK
Music industry 'slow to change'

by Darren Waters
BBC News Online entertainment staff

The music industry is threatening to sue individual computer users who download songs from the internet without paying for copyright.

But some people believe it is the industry's fault for failing to meet consumers' needs and adapting too slowly to new technologies.

Gerd Leonhard, founder and former chief executive officer of licensemusic.com and founder of digmarketing.com, told BBC News Online that the industry is clinging on to the past.

One billion music files are available at any one time*
Five million people are using services like Kazaa at any one time*
The amount of non-copyright downloading has doubled in volume*
*Source IFPI
"The industry has always opposed new technology," he said.

"They are following a system that has worked for the last 50 years."

The industry says it is a facing a global crisis as sales continue to drop worldwide year on year.

Earlier this year the global music industry reported that album sales had dropped by 6%.

The industry frequently paints a picture of crisis as it tries to stop music sales haemorrhaging away through online piracy and CD copying.

Anthony Morgan, strategy director of music business and marketing agency Frukt, said the industry was trying to change.

"It's more accurate to say that the industry is evolving into a new structure," he told BBC News Online.

Music sales are falling but they are still at record levels compared with a decade ago, he said.

MUSIC FORMAT SALES 2002
CD albums - down 6%
Singles - down 16%
Cassettes - down 36%
VHS - down 42%
DVD - up 58%
Source: IFPI
He added: "Globally there is a decrease in sales - but from some of the highest sales of all time.

"Sales are possibly dropping to something which is more realistic."

Worldwide music sales amounted to $32bn (20.5bn), according to recent figures.

"Music is bigger than ever," said Mr Leonhard.

"When you look at the numbers - 250 million downloads from [online music service] Kazaa for example.

"People are enjoying more music more than ever before. That points to a great potential."

Mr Leonhard argues that the industry is reacting slowly to change because it does not want to abandon business practices that have brought it great success over the last half a century.

"The problem for the industry is: Who makes the money in the future?"

He added: "The people who are making the money now are much less interested in making these changes."

Mr Morgan said: "It is not an industry that has had to change much.

"Traditionally the music industry has been about selling product on a piece of plastic.


"The industry has been clinging to CDs for too long."

The industry says it is making great strides to adapt but is struggling to cope with rampant piracy.

Mr Morgan said: "Piracy is certainly having an effect. Within certain demographics - people who are downloading pirated music are probably buying less music.

"The problem is: there is very little research into the effects of piracy: not just the detrimental effects but also into how consumers behave when they use these music websites."

For the future, the music business should concentrate on artist development and artists' relations, said Mr Leonhard.

The industry should cut the cost of CD and mp3 sales in order to curb piracy, he added.

He said record labels were not taking advantage of back catalogues and needed to re-engage with people over 35 years old.

Only 10% of adults over 35 still buy music, he said.

He said despite the explosion in the use of mp3s the compact disc still ruled.

"People will always want fixed media - at least for the next 15 years or until online music is ubiquitous."




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