Canada's Music Sales Fall 35% in First Quarter

    -   Decline compounds 12% drop in 2006 - the largest year-over-year
        decrease in Canada since the advent of widespread unauthorized
        file-swapping in 1999
    -   Unabated counterfeiting and Internet file-swapping cited as primary
        factors in decline
    -   Recording industry, other business groups step up call for government
        action against piracy

    TORONTO, April 26 /CNW/ - Following the largest-ever annual decline in
Canada's music market - a 12 percent drop from 2005 to 2006 - sales of CDs,
music DVDs and other "physical" music formats fell an unprecedented 35 percent
in the first quarter of 2007 compared with the same period a year earlier, the
Canadian Recording Industry Association (CRIA) reported today.
    This comes on top of an almost unbroken string of declines since the
widespread advent of unauthorized file-swapping in 1999 and the proliferation
of CD and music DVD counterfeiting in recent years. Digital music sales,
estimated at about 6 percent of the Canadian market in 2006, are falling far
short of replacing lost CD and DVD sales.
    "We've experienced sizeable short-term drops before, but nothing compares
to the drastic numbers we're seeing so far this year," said CRIA President
Graham Henderson. He cited the decline as a "wake-up call" for the federal
government to rein in Canada's burgeoning black market.
    The impact of shrinking sales is being felt in almost every corner of the
music business - by Canadian and foreign artists, music labels of all sizes,
retailers and their employees. For example, CD album sales by Canadian artists
fell 7 percent in 2006 compared with 2005, according to Nielsen SoundScan's
tracking of Canada's top 200 albums. Top 200 CD album sales by all artists
dropped 9 percent. Such declines have forced Canada's music industry to reduce
its workforce by approximately half since 1999.
    Terry Canham, a leading accountant who acts for a host of Canada's
recording artists, confirms the grim picture.
    "Though I can't talk about individual clients, I can confirm that the
income of Canadian recording artists, large and small, has taken a beating
over the last several years," said Canham, President of Green Note Inc.,
Canada's premier business services firm for musicians. "Any suggestion that
Canadian artists have entered into some kind of golden digital age is
dangerously wrong and does a disservice to the artistic community."

    The impact of counterfeiting and digital piracy

    The two principal factors behind the music sales decline are unabated
Internet file-swapping and the widespread availability of counterfeit CDs and
DVDs. These factors loom larger in Canada than many other developed nations
because of this country's relatively lax laws and enforcement against both
digital and physical piracy.
    In contrast with Canada's relatively undeveloped digital market, in the
US, where stronger copyright laws and other measures against piracy are in
place, digital downloads, subscription services and mobile music now comprise
17 percent of sales. Per capita digital music sales in the U.S. are nearly
four times those in Canada. Because of weak copyright rules that inhibit
investment in legitimate digital services and their entry into the market,
digital sales in Canada are failing to replace declining CD and music DVD
sales at the same rate they do in the US.
    Based on research conducted last year, Pollara conservatively estimates
that there are more than 1.3 billion unauthorized downloads in this country
per year, far overshadowing the estimated 20 million legitimate downloads in
2006, as reported by survey respondents. This finding indicates that the
readiness of many Canadians to choose unauthorized file-sharing sites over
legitimate digital services is fundamentally unchanged since the OECD in 2005
identified Canada as having the highest per capita incidence of online
file-swapping in the world.
    "Independent research, academic studies and common sense all point in the
same direction - that file-swapping and counterfeiting, and the decline in
music sales, are closely linked," Henderson said.
    The harm is felt by major record labels and smaller, Canadian-owned
indies alike. Statistics Canada's Sound Recording Survey found that, in 2003 -
the most recent year for which StatsCan has compiled industry earnings -
"Canadian-controlled firms were left with almost no profit margin
(0.5 percent) compared with a profit margin of 7.1 percent in 2000." At
multinational firms, profit margins fell from 12.7 percent to 3.2 percent
during the same period.

    Business groups renew call for copyright law revisions and anti-
    counterfeiting measures

    CRIA is calling upon the federal government to update the Copyright Act
to protect artists and other creators of intellectual property from the
unauthorized dissemination of their work on the Internet. CRIA's initiative is
supported by the Canadian Chamber of Commerce and organizations representing
the book publishing, software and movie industries.
    The groups are also calling for government policies to deter
counterfeiting, including measures to curb imports of counterfeit products and
tougher laws and enforcement against manufacturing and retailing of pirated
goods in Canada. The reforms sought would place Canada on an equal footing
with its major trading partners, most of which have already updated their
copyright laws in line with the World Intellectual Property Organization
(WIPO) Treaties, to which Canada is a signatory.
    "The impacts of counterfeiting and digital piracy extend far beyond music
to literally any business or occupation based on creative goods," said Michael
Murphy, Executive Vice President Policy, Canadian Chamber of Commerce. "To
better protect Canadians and compete successfully in a world economy that is
increasingly driven by intellectual property, Canada must act quickly to
reform its copyright laws and enact measures against counterfeiting. This is a
crime that not only affects every sector of the economy but that also has
serious repercussions on the safety of Canadians."

    Further details on the statistics

    The net value of wholesale physical music sales fell 35 percent in the
first quarter of 2007 to $68.7 million, from $105.6 million a year earlier.
Unit sales of CDs, music DVDs and other "physical" formats were 7.1 million
vs. 10.2 million - a 30 percent drop. In 2006, the net value of sales declined
12 percent to $536 million, from $609.2 million a year earlier. Unit sales
dropped 7 percent year-over-year to 50.6 million from 54.3 million.
    The statistics above represent the vast majority of music sales in
Canada. Statistics for digital sales are not yet available for the period.
Additional details on the latest sales figures are available at

    About the Canadian Recording Industry Association

    The Canadian Recording Industry Association (CRIA) promotes the interests
of Canadian record companies.

For further information:

For further information: Don Hogarth, (416) 967-7272,

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