Sweden sees music sales soar after crackdown on filesharing

UK music executives are looking to the home of Abba for signs that declining sales can be stemmed by new filesharing laws

Thank you for the music – or rather thank you for paying for the music – to misquote Abba.

Record labels are pointing to the dramatic rise in music sales in Sweden, just months after the country introduced anti-piracy laws, as evidence of what a similar crackdown in Britain could do to the flagging market.

Figures from the record labels association IFPI Sweden show revenues rose 18% in the first nine months of this year, a significant reversal from seven consecutive years of decline. Much of the rise came after April’s implementation of an anti-piracy law and a ruling against the operators of The Pirate Bay, the filesharing site. The two events generated a great deal of interest and deeply divided debate about copyright in Sweden.

Music executives in Britain are looking to Sweden’s experience for signs that their own tumbling sales can be stemmed by new laws outlined by the government last week. Business secretary Lord Mandelson’s digital economy bill includes controversial plans to send warning letters to the most flagrant unlawful filesharers and paves the way for persistent offenders to have their broadband suspended from 2011.

Opponents of the British proposals are quick to point out that the Swedish sales rise coincides with the emergence of new legal digital services such as the popular Spotify.

Music industry groups concede that too, but they insist the combination of carrot and stick is the key to changing consumer behaviour.

“The increase in sales in Sweden, set against the backdrop of innovative new digital services and tighter copyright laws, is encouraging,” said John Kennedy, the chairman and chief executive of IFPI.

“It is too early to say if Sweden has permanently turned a corner, but we hope that users there will permanently switch from unlicensed filesharing networks that give nothing back to the music community to great value legal services whose operators recognise continuous investment is needed to discover and promote the talent of tomorrow.”

The 18% rise in Swedish sales over the past nine months reflects an 80% increase in the digital market and a 9% rise in physical format sales. IFPI also points out that four new physical music retailers have opened in Stockholm this year.

Consumer push

Ludvig Werner, who chairs IFPI Sweden, said even if the new law had not changed people’s perceptions of whether copyright owners should be properly remunerated, it had changed their behaviour. A crackdown on illegal sites combined with the spread of legal sites supported by advertising had helped push consumers from one to the other.

“It’s like speeding, put up cameras and people will start to ease off the gas pedal. Even if it doesn’t change the attitudes, they find legal alternatives because they don’t want to get caught,” he said.

The rise in sales has been as “dramatic as when the figures started to drop in 2002″, he says. But music bosses in the home of Abba and Ace of Base are not cracking open the bubbly just yet.

“The music business in Sweden has been so used to negative sales information for the majority of a decade, so they don’t stand up and drink champagne when they see these figures,” said Werner.

“They are saying: ‘It’s interesting … but let’s wait and see if this is a change in trends or is it just a deviation from the downward spiral?’” The IFPI also flags up rising sales in South Korea, another country that recently introduced an anti-piracy law and where several legal services have launched. It says music sales there were up 18% in the first half of 2009 on a year ago, as CD sales rose for the first time in five years.

Geoff Taylor, the chief executive of BPI, the UK record labels group, says the figures from Sweden and South Korea show how legislation can steer people into legal services. He hopes Britain’s experience will follow suit.

“We hope that even the announcement of the new legislation will have some educational effect by reminding people illegal downloading is against the law and that there’s a huge range of legal services out there,” he said.

On the other side of the debate over similar proposed laws in Britain, Jim Killock, executive director of the Open Rights Group, questioned how much the Swedish figures reflected a legal change there.

“We shouldn’t be surprised that digital revenues are going up in countries like Sweden now that new services have been online for a while. The question is whether it is necessary to have harsh enforcements,” he said.

Killock believes music companies and other rights holders are already alienating consumers. He points out that Sweden’s Pirate party, which wants to legalise internet filesharing, has won a seat in the European parliament. His own group, which is running a “say no to disconnection” campaign, has seen its membership grow by 20% in the last two months, to just over 1,000 people.

“If the music industry wants to build a movement of people that are angry with the way they are being treated they are going about it the right way,” he said. He and many of the internet service providers argue the way to curb piracy is for music companies to provide more legal online music sources such as Spotify.

“Filesharing is not the root of the problem. It’s a symptom not a cause. It’s a symptom of a lack of relevant services,” said Killock.

Broadband provider TalkTalk, whose chief executive, Charles Dunstone, has been an outspoken opponent of Mandelson’s planned clampdown, said the sales rise in Sweden did reflect “some movement towards more accessible and reasonably priced content”.

Undetectable

But the company questioned whether piracy was on the wane. “We have almost no idea how much content is being accessed illegally because people are migrating away from P2P (peer to peer) platforms and increasingly access content via proxy servers, encryption, ripping from internet, radio and so on – all of which is undetectable,” said a spokesman.

“At best, the Swedish system has hastened the migration from P2P. The development of better legitimate models is very welcome and it probably explains the uptick in sales. But it seems highly implausible that it is legislation which has prompted any reversal of fortune,” he added.

The debate over how much new laws can actually help music sales over the long term has also deeply divided musicians. In Sweden many artists came out in support of new legislation, says Werner. But many opposed it as counterproductive.

Alex Jonsson, the keyboard player in Maze of Time, a Swedish progressive rock band, describes the new law as “absolutely horrid”, partly because of the privacy implications, but also because he believes many bands have benefited from filesharing.

“If I could, I would put everything out there. The way the music business has developed means that spread is much more important than short-term gain … It’s a changing climate and you have to look at new ways of getting your music out, such as the live scene and bundling music together with other services and so on,” he said.

“I do get a smaller piece of the pie but the pie is getting bigger. People in Kuala Lumpur would never have known before about a band in a suburb of Stockholm.”