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Music industry: Piracy is choking sales

Worldwide music sales fell in 2002 for the third year in a row, says an international recording industry group--and Internet pirates are to blame.

Worldwide sales of music CDs, records and cassettes fell for the third year in a row, hit largely by rising Internet piracy in the United States, according to an international recording industry group.

Last year saw the steepest fall yet, with a 7 percent drop in global music sales and a 10 percent fall in units sold in the United States, according to figures for 2002 released Wednesday by the International Federation of the Phonographic Industry (IFPI).

News of falling music sales has become a recurring refrain from an industry beset on all sides by an anemic economy, by changing consumer consumption patterns and by high-tech piracy competition.

"This year's figures hold no surprises," said Jay Berman, chief executive officer of the IFPI. "Widespread use of illegal sites, made easier with the growth of broadband access in the major markets, is affecting an industry that is also having to compete with increased sales of other entertainment formats such as DVD films and new video game consoles."

If the drop in the music sales is undeniable, the industry's unwavering attribution of it to the effects of Internet piracy remains controversial. Competing studies from the record industry and independent analysts have shown differing results, with many file-swapping aficionados saying they are less willing to buy music on the one hand, and others saying they use downloading to make better-informed purchases on the other hand.

As Berman noted, some consumers may have shifted their discretionary, entertainment-oriented spending toward buying DVDs rather than CDs. In 2002, retail DVD sales rose by 61 percent to $8.7 billion, or about $3.3 billion more than in 2001, according to the DVD Entertainment Group. By contrast, the value of United States music shipments in 2002 dropped by about $1.02 billion to $12.6 billion, according to the Recording Industry Association of America trade group.

Those figures too can be interpreted in different ways. Critics of the music industry's attack on Internet services such as Napster and Kazaa contend that record labels are simply not releasing enough good music, and consumers see DVDs as a better value than CDs.

The record industry, however, says the figures show that piracy has made it easy for many people to get music for free, allowing consumers to download songs and spend their money on DVDs instead.

The figures that the IFPI released Wednesday showed that regional differences--whether in music taste, economy or prevailing technology--still matter greatly.

In Japan, CD-R burning has led to people passing up legitimate music sales, contributing to a 9 percent drop in sales there, contends the organization. Japanese consumers burned about 236 million recordable CDs and bought just 229 million music CDs, it said.

Germany, where retail CD-burning facilities can be found in storefronts, also saw a 9 percent drop in music sales. France saw a 4 percent gain in sales, however, driven by a surge in demand for French artists, the trade group said.

In the United Kingdom, unit sales remain steady; a five-year growth spurt has ended. Revenue from last year's sales dropped 3 percent as music prices fell.

Globally, CD sales fell by 6 percent, with steeper drops in single and cassette sales contributing to the larger overall fall in revenues. Total sales fell 5 percent a year in 2000 and 2001.