Piracy Shaves 11% Off Music Sales

The music industry on Wednesday suffered another blow when new figures showed global sales fall by almost 11 per cent in the first six months of the year.

The IFPI, representing the world's largest music companies, blamed internet piracy and illegal CD manufacturing as sales fell to $12.7bn, down from $14.3bn in the first half of 2002.

Rampant piracy, intense competition and pricing pressure is expected to lead to a wave of consolidation among the five music majors: Universal, Sony Music, EMI, Warner Music and BMG.

EMI has approached Warner Music, part of Time Warner, with a $1.6bn takeover proposal. Time Warner has also discussed a possible 50-50 merger with BMG, the music arm of Germany's Bertelsmann.

BMG has also been named by industry analysts as a possible partner for Sony Music, which has embarked on a major restructuring. Regulatory opposition in Brussels and Washington, however, could prevent any deal proceeding.

Universal Music, part of Vivendi Universal of France, has reacted to volatile consumer demand by cutting wholesale CD prices by more than 20 per cent.

The IFPI, representing more than 1500 record companies, hinted that sales would have fallen more sharply, had it not been for strong demand for DVD music videos, which rose 55 per cent by value in the first six months of the year.

Warner Music and Sony are understood to be co-operating on the production of combined CDs and DVDs, dubbed "dual discs", in a bid to exploit strong demand for music videos.

For the industry, first half sales account for about 40 per cent of the annual total. Music industry executives hope the arrival of legitimate online sales and more competitive pricing will boost second half demand.

In the first half, the IFPI named albums by Christina Aguilera, Coldplay and Celine Dion.

But the association admitted that sales in Germany, Japan, France and the US suffered significant declines.

In a statement, the IFPI added: "Germany, Japan, the US and Canada have seen the numbers of unauthorised downloads of tracks and copied CDs reach, and in some cases exceed, the levels of legitimate track and CD album sales."

That decline was offset by some volume increases in the UK and Spain, while Russia benefited from a transition from cassettes to CDs.