Millions of Europeans Pay for Music Downloads
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By Bernhard Warner, European Internet Correspondent
LONDON (Reuters) - Europeans purchased over three million song downloads in 2003 from the continent's primary online music store, OD2, raising faint hopes the lacklustre music industry is on the road to recovery.
A few million downloads is not going to immediately turn around an industry bracing for its fourth straight year of declining CD sales.
But the emerging download market offers a glimmer of hope for record label executives who have struggled for years to thwart free file-sharing services like Kazaa.
"I have to believe electronic distribution of music will be an increasingly important part of the business for record labels, but unfortunately I don't think this is an instant cure," Charles Grimsdale, chief executive of Britain's OD2, told Reuters Tuesday.
"The market is growing fast for sure, but new markets take time," said Grimsdale, who co-founded the company with rocker Peter Gabriel.
Still, the volume of downloads is growing 25 percent month on month, Grimsdale said, which would mean download sales should grow more than three-fold in 2004.
The more mature U.S. market is growing even faster. American music fans purchased 30 million download tracks in 2003 as online stores such as Apple Computer's iTunes proved a big hit with consumers.
The success of iTunes, combined with some encouraging reports that online piracy may be tailing off in the U.S., has helped propel shares of EMI, the largest stand-alone music company, more than 40 percent higher since the beginning of the year.
At 4:07 a.m. EST Tuesday, shares in EMI were trading down 0.3 percent at 225.5 pence.
For OD2, which licenses its download service to 30 European retail and Internet partners including HMV and Microsoft's MSN, the volume of downloads picked up in August when it introduced through MSN a tariff scheme allowing users to buy downloads without a subscription.
"Our sales increased in some cases as much as 900 percent at that point," Grimsdale said.
Grimsdale acknowledged competition will be much more fierce in 2004. Industry officials expect the big U.S.-based online stores such as iTunes and Roxio's Napster (news - web sites) will make their European debut by summer.
OD2 is the most established player in Europe, having arranged licensing deals with all five major music labels, giving it a catalog of 260,000 songs.
Grimsdale said it was the process of adding to its library several hundred thousands songs it has under license, giving it a catalog of one million songs. "We are furiously trying to fill the gap," he said.
