Canadian Digital Album Sales Increased By 40% in 2011

The Canadian music industry since the beginnings of digital peer-to-peer file sharing has long struggled to reclaim lost revenues. In the 2012 Stratford Report, Larry LeBlanc, a former 17-year Canadian bureau chief of Billboard Magazine, says that the Canadian music industry is on a digital upswing after years of decline overall.

Digital track and digital album sales both had a 39% increase last year alone in Canada, while physical compact disc sales dropped by 7%. Global revenues to record companies grew an estimated 8% to $5.2 billion US according to the International Federation of the Phonographic Industry.

The inherent ways to monetize musical content is rapidly growing. Some of these platforms include online music outlets, download stores, on-demand streaming services, cloud-based streaming services, and other new music experiences.  LeBlanc stressed that as the number of devices and delivery methods for digital music continue to explode, creators and rights holders must increasingly adapt to this evolving digital world.

Prior to 2011’s digital upswing, the music industry’s revenues last peaked in 1999, during the beginnings of Sean Parker’s Napster. The latter and other services promoted the beginnings of peer-to-peer music file sharing using MP3 files. LeBlanc says that music creators and record companies were side-swiped by a technological revolution and soon faced a borderless global ecosystem that defied control or monetization.

Instead of embracing digital, LeBlanc believes the music industry was short-sighted in trying to prevent digital music outright. The traditional music business model was inflexible to this rapid technological change. As the Internet gained in popularity music revenues continued to decline. Piracy options for single tracks became more popular than legal physical music options.

The main issue in the music business is still a tug and pull war with labels, independent artists, and music publishers versus Internet services. While there have been recent movements towards simplifying licensing, rights holders are still charging high advances from digital services. This is to protect their traditional forms of revenue.

But LeBlanc continued in saying that digital music is moving rapidly towards access versus possession. The Global Recorded Music Market report from Strategy Analytics predicted last year that the digital music business will continue to be dominated by single track sales until 2015. The single track is only available in digital—labels stopped manufacturing them in 2003.

Further, artists can now use social and mobile media to directly reach fans and mass retail without label affiliation. This has created a middle class of music where musicians have managed to build successful digital music businesses. That’s despite widespread piracy.

LeBlanc says that many Canadian artists lack strategies for dealing with new media beyond a website though. In order to survive financially, artists will almost certainly require an understanding of social broadcasting, if not mobile broadcasting, and beyond. Strategy Analytics further predicted that advertising and subscription models will gain in importance in the next five years. These will be alternative business models for musicians in an access based world.

After all, the International Federation of the Phonographic Industry recently reported that one in four Internet users globally regularly access licensed sites that contain copyrighted music.

Perhaps a shift by consumers to downloading tracks legally online in the music world is occurring. Still, it will be challenging to ensure that creators are fairly compensated for their work in the continued fight against piracy.

But there seems to be a little bit of room for piracy to continue existing. The entertainment industry has revenues of $2 trillion US globally and has been growing at about 16% a year clip for the last ten years.

The music industry going forward can creatively leverage more entertainment channels to help re-claim over a decade of lost revenue. They can do so as technological possibilities continue to advance allowing for artists to create new musical experiences.