Digital Music Sales To Beat Out Physical Sales by 2012
22 February 2008Digital music sales will account for 50% of the US market in 2011 and surpass physical album sales a year later, according to Forrester Research.
Digital music will grow at a compound annual growth rate (CAGR) of 23% over the next five years and reach $4.8 billion by 2012, but will not make up for continuing physical losses.
CD sales are projected to fall to about $3.8 billion in 2012.
“This is the end of the music industry as we know it,” said Forrester Research VP and principal analyst James McQuivey. “Only hardware and software providers can ultimately make listening to music as easy as turning on the radio.”
The report sees the future mass market in digital downloads as making it easy for consumers to find, buy and listen to music.
Subscription services will not fade away but show modest growth and reach revenues of $459 million in 2012.
Forrester also believes that ad-supported download services will be suffocated by the combo of DRM-free and on-demand streaming sites like imeem.com.
“The industry has to redefine what its product is,” said McQuivey. “Music executives have spent years tracking CD sales. But the artist is the product - not just the source of it. New forms of revenue will come from unexpected sources. For example, the industry has failed to capitalize on the growing popularity of video games such as Guitar Hero and Rock Band. In a market where musicians are happy to sell a million copies of a CD, a video game market where titles can sell five million copies is enough to motivate even the most depressed music executive.”
Other thoughts from the report “The End Of The Music Industry As We Know It”:
* The average MP3 player is only 57% full and households that already have one are buying many of the devices.
* DRM-free music will be distributed by labels to online music sites other than Amazon and Apple iTunes.
* DRM-free music will eventually enable every page on social sites - such as MySpace and Facebook - to serve as a music store where users can sell tracks to friends.
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