Net piracy not to blame for drop in music sales, says Forrester

According to the report, surveys of 1,000 consumers did not find any evidence of decreased CD buying among frequent digital music consumers.

Josh Bernoff, principal analyst at Forrester Research, said:

“There is no denying that times are tough for the music business, but not because of downloading… Plenty of other causes are viable, including the economic recession and competition from surging video game and DVD sales. But labels will soon discover that there are several simple ways of satisfying today's sophisticated digital music consumers."

Forrester predicts that, in the next two years, labels will struggle to meet consumer demands. However, the report claims that by 2005, labels will endorse a standard download contract that supports burning and a greater range of devices, and will make content available on equal terms to all distributors, while on-line retailers will become hubs for downloading.

As a result of the growth potential, artists will eventually embrace the internet and sign downloading rights over to their labels. The report estimates that by 2007, digital music revenues will constitute 17% of the music business in the US.

However, the Recording Industry Association of America (RIAA), which represents all major record labels, attributes the decline in music sales to illicit downloading and CD burning, and intends to continue taking legal action against file-sharing and peer-to-peer services.

Hilary Rosen, chairman and chief executive of RIAA said to the Financial Times: “In 1999, 19% of people using the internet for music purposes said they downloaded music for free; last year that number rose to 31%.”

The RIAA is also considering the controversial option of suing individual internet users who offer large volumes of peer-to-peer services. However, the record labels have so far been reluctant to follow suit.