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Study: Falling CD sales can't be blamed on P2P

Online piracy is a problem, but other factors--such as rise in number of entertainment sources--are key to drop in CD sales, OECD says.

Declining CD sales can't be blamed on file-sharing networks alone, according to a new report.

The Paris-based Organisation for Economic Co-operation and Development (OECD) said Monday that digital music piracy is a problem, but other factors--such as the rise in the number of entertainment sources--are more likely to have had a significant impact on music sales.

"It is very difficult to establish a basis to prove a causal relationship between the size of the drop in music sales and the rise of file sharing. Sales of CDs, as well as the success of licensed online music services are likely to have been affected to some degree by a variety of other factors, for example physical piracy and CD burning, competition from other, newer entertainment products and faltering consumer spending in some markets," the report said.

While the report found a "pronounced" fall in overall global CD sales of 20 percent between 1999 and 2003, and a particularly large drop in CD sales in the U.S., some countries, including France, Germany, Japan and the United Kingdom, are actually experiencing steady or growing CD sales.

In addition, the OECD questioned the viability of some music download business models and warned that the music industry needs to find a balance between reducing online piracy and developing models that are attractive to consumers. The industry also needs to provide existing and new participants in the online music arena with a growing stream of revenue for the legitimate distribution of recordings, the report said.

"Online music providers still seem to struggle making profits at current prices, with demand growing from low levels and having to compete against unauthorized downloading," the report said. "In the current, low-volume market, digital economies of scale have not yet been realized. Some of the fixed costs of labels to produce artists stay essentially the same as before. Moreover, the digital distribution of songs is far from costless."

Andy McCue of reported from London.