Tough tactics give music industry new sales hope

Monday, January 12, 2004

LOS ANGELES -- Richard Warner and his family have spent thousands of dollars over the years on music, buying more than 500 CDs and 700 vinyl albums.

Now Warner is surrendering $4,000 to settle a copyright infringement lawsuit -- the price of his 17-year-old daughter's habit of downloading music for free.

The 49-year-old California wine merchant was ensnared in a September wave of recording industry lawsuits aimed at chilling illegal downloading. But while he's angry at the music labels for suing the loyal customer he considers himself to be, Warner has signed up for an industry-backed online music service.

"I encouraged my daughter to enjoy music, and I did not want to make this a negative in our life," Warner said. "We're not going to stop enjoying music."

After four straight years of declining CD sales, the recording industry is hanging hopes for a recovery on music fans like Warner going digital -- and being willing to pay for it.

More than 19.2 million digital tracks were sold online in the last six months, according to Nielsen Soundscan, helping to narrow the music industry's losses last year.

Overall North American music sales were down 0.8 percent last year over 2002 while album sales, which includes cassettes and other formats, were down 3.6 percent, says Nielsen Soundscan.

Edgar Bronfman Jr., the former Universal Music chief who last month led a group of investors in the purchase of Warner Music from Time Warner Inc., said he believes digital music sales will eventually help the industry recover -- although continued pain will precede the healing.

"I think that the industry is going to see continued difficulty for a couple of years," Bronfman told The Associated Press.

Bronfman said the music industry has only begun to tap the potential for digital distribution and that it's going to take time for the different business models to develop and grow.

"We're already seeing just the very nascent, very beginnings of that here in the United States, and I think that trend will continue," Bronfman said.

Companies from Wal-Mart Stores Inc. to a revamped Napster have dived into online music sales. After last year's success by Apple Computer Inc.'s iTunes Music Store and iPod digital player, it's no surprise.

"We've made some incredible headway," said Ted Cohen, senior vice president of digital development and distribution for EMI Music. "Wal-Mart going into this business says a lot."

After seeing many traditional music stores close, music companies now are trying to adapt to an online market where singles are king and the traditional CD format is losing relevance.

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