Digital Music Surges as CD Sales Fall

Digital music continues to become a bigger force in the broader music industry, contributing six percent of total revenues during the first six months of 2005. However, even with the increased revenues, the broader music market fell 1.9 percent.

The report, released Monday by the trade group International Federation of the Phonographic Industry (IFPI), said globally recorded music sales fell to $13.2 billion from $13.4 billion during the same period in 2004.

But for the first time, online and mobile music sales are making an impact, amounting to $790 million, up $220 million from last year.

Digital music sales are highest in the world's top five markets including the US, Japan, the UK, Germany and France, the group reported.

The group credits the rise in digital music sales to increased penetration of broadband and 3G mobile services among consumers, ever increasing digital music player sales, and the introduction of new music services. Also, the IFPI credited anti-piracy efforts with helping the digital music market to grow.

"The digital music boom is continuing and it is growing at an exciting pace for the music industry, for online retailers and for consumers," said IFPI chairman and CEO John Kennedy.

Digital music's growth can even be measured in the popularity of some tracks. Interscope Records on Monday announced that Gwen Stefani's hit single "Hollaback Girl" had sold some 995,000 digital downloads and was expected to become the first digital track to ever cross the one million mark this week.

"The music industry is changing and this is a major sign that digital downloading has reached the mass market and become a very significant business," Jimmy Iovine, chairman of Interscope, said in a statement.

Sales of physical music units such as CDs continues to drop sharply, falling 6.3 and 6.6 percent in revenue and units sold, respectively.