Steve Dinneen
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A DRAMATIC collapse of CD sales and online piracy dragged global recorded music sales down by $1.5bn (£940m) last year – more than the total annual revenue of the UK music industry.

Income from recorded music slumped 8.4 per cent to $15.9bn. CD sales dragged the total down with a drop of 14 per cent to $10.4bn, with little sign that digital sales are ready to take up the slack.

Radio advertising revenues rose $500m but live music receipts – touted by some as the saviour of the industry – fell $1.7bn, according to a grim report by music industry body IFPI.

Digital sales in the UK shot up nearly 20 per cent to $347m, making up a quarter of total income. However, overall revenue plunged 11 per cent to $1.38bn, precipitated by a 19.2 per cent fall in CD sales to $920m.

The UK fell behind Germany to become the fourth biggest music market. The US, Japan and Germany now rank above the UK.

Universal Music, Sony Music Entertainment, Warner Music Group and EMI – the UK market leaders – all struggled last year.

Paul Smernicki, director of digital for Universal Music UK, told City A.M. that conditions are tough but pointed to subscription models such as Spotify for future revenue streams.

He said: “It’s a challenging landscape. Digital sales are not filling the hole left by physical products yet. But I believe we will get there. We have had 60 years of the same consumption model. It will take time to turn it around but subscription will be king.”

Musicians have been directly hit, with those in the UK seeing royalties from recorded media falling 8.8 per cent, although this was partially offset by commercial royalties and increased exports.

Sales in the two biggest music markets, the US and Japan, fell by 10 per cent and 8.3 per cent respectively, with piracy blamed for a sharp fall in digital sales in Japan. South Korea made strong gains, with sales rising by 11.7 per cent in 2010, the second year of strong growth following a 10.4 per cent rise in 2009.

India also continued to see both digital sales and performance rights growth.

The report comes just days after a High Court hearing over the digital economy act ended.

A judge will now decide whether the legislation, which could force ISPs such as BT and TalkTalk to suspend the accounts of suspected pirates, should be altered or scrapped altogether.

IFPI chief executive Frances Moore said:

“Illegal services that do not pay performers and producers for the music they distribute continue to undermine investment in artists and hit jobs in the creative sector.

“We believe that with the help of governments and internet intermediaries worldwide we can turn the tide on piracy.

“Governments want to create a sustainable digital economy that delivers jobs, growth and tax revenues. This is only possible if intellectual property rights are respected in the digital space.”