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Digital music report: Mobile is the future

January 20, 2011 |  4:00 pm

It's official. Digital music sales are slowing worldwide, not just in the U.S., as recent SoundScan data suggests.

Global digital sales grew 6% last year to $4.6 billion, a considerably cooler pace than 12% in 2009 and 25% in 2008, according to an annual report by the London-based International Federation for the Phonographic Industry.

Kesha Tik Tok With digital music sales slowing worldwide, music companies are looking everywhere they can for a little extra juice. Two sources come up prominently in the report: cellphone carriers and Internet service providers.

The music industry dangled a tasty carrot. Carriers and ISPs in the U.K., for example, stand to reap as much as $103 million annually within three years of offering digital music streaming services to their subscribers, IFPI said, citing a report from European technology consulting firm Ovum. In short, labels are wooing ISPs and carriers by saying, "Together, we can make beautiful music -- and lots of money."

Why do music companies need fuddy-duddy cable and phone companies? Two words: direct billing.

Jim Rondinelli, vice president of Slacker, a San Diego-based digital music service, summarized it by saying, "That means highly visible distribution on the handset and direct billing that puts the consumer no more than two clicks away from the transaction. There is simply no substitute for that."

Another bonus of doing business with carriers is that once the service charge is tacked on to a monthly phone or cable bill, many subscribers forget that it's even there and don't cancel.

With ISPs in particular, there's an implied quid pro quo: Help us police piracy by shutting down illegal sites and cutting off infringing users, and we'll help you make money by selling our music services.

Will the music industry's love song work? Chances are, this is a good year to find out.

-- Alex Pham


Photo: Ke$ha, whose hit single "Tik Tok," was the No. 1 digital track in 2010, according to IFPI. Credit: RCA Music Group