The Australian Record Industry Association's (ARIA) chief executive officer, Stephen Peach, said the increased penetration of broadband meant more people now had access to a technology that facilitated the illegal downloading of music files. This, in turn, impacted on demand for paid music.
"What we've noticed is a similar pattern with that of overseas markets," Peach said. "As broadband penetration starts to increase, you start to see a decline in the market. That experience is seen in a number of markets like in the US in the last few years.
"When we looked at the Australian [situation], most Internet access 12 to 18 months ago was via dial up accounts. Twelve months later, no-one advertises dial up anymore. We know that broadband facilitates the illegal downloading of copyright material far more than dial-up, so it is no great surprise that we see this decline happening," Peach told ZDNet Australia.
A recently-released report by ARIA said the wholesale market for recorded music for the year ended December 2004 showed a continuation of the downward trend, in both value and volume, initially identified in mid-2004. Overall wholesale recorded music sales --including albums, singles and DVDs-- were down almost 4 percent by volume to 63.1 million units and the overall value fell by 6 percent to AU$607 million.
However, Peach cautioned against attributing the full decline to online piracy. "It is very hard to quantify the effect of online piracy on music sales. There are other legitimate competition for the consumer's dollar. We'd say that online piracy is a significant contributor but it would be impossible to quantify until we do detailed research".
ARIA's report cited other reasons for the decline in music sales, including the rise of "competitive entertainment products including new technology such as digital music carriers, advanced mobile telephones and non-music DVD."
Peach added although higher broadband availability increases the rate of illegal music downloads, it is also essential to the industry's legal music download strategy.
"We hope to see in 2005 some of those legal music download sites kick in. There are rumours of iTunes Australia launching this year but it's hard to know because they won't say why it is taking so long. Broadband is the key to the success of any of these online services," Peach said.
Despite last year's difficulties, ARIA said it remains optimistic about the coming year.
The report said in 2004 there was a ten-fold increase in the global market for legitimate digital music downloads -- "a trend that the industry anticipates will start to be replicated locally during 2005".
"Whilst the online services currently operating in Australia have yet to break through in the same way that they have overseas, the industry is encouraged by the overseas results during 2004 and looks forward to similar success locally during 2005," the report said.
ARIA also cited as a positive for the industry the heightened availability of 3G mobile phone services in Australia this year. This, ARIA said, will "create growth in downloads of both full recordings as well as master tones -- ring tones made from the actual studio recording-- direct to mobile phones, together with the streaming of full-length audio and video."
"The industry's continued commitment to the ongoing fight against online and offline piracy demonstrates that it is determined to create and entrench an environment where legitimate download services and the physical recorded music market can grow and prosper," the report said.