Digital sales of music represented 10% of the total worldwide music market in 2007, up from 6% in 2006, reports In-Stat. By 2012, digital music sales will represent an impressive 40% of all music purchased worldwide, the high-tech market research firm says. Factors contributing to this growth include the global expansion of broadband, continued demand for single-track downloads, and expanding music catalogues. Another key driver is the potential for market growth in full-track downloads to mobile handsets in markets other than Japan, which currently is the primary market for this type of digital music format.
“Digital piracy continues to represent the primary challenge to online music service providers,” says Stephanie Ethier, In-Stat analyst, in the press release. “Other obstacles still include the lack of interoperability between services and devices due to differing digital rights management (DRM) technologies, and weak consumer demand for subscription-based services. Another potential market inhibitor is the fact that content owners, cellular service providers and handset manufacturers are increasing the amount of marketing and promotion for mobile music.”
Recent research by In-Stat found the following:
• Sales for online digital music reached $3.05 billion in 2007, up 48% from 2006.
• Revenue for worldwide full track mobile downloads will reach approximately $4.2 billion by 2012.
• The majority of respondents who accessed online video (72.3%) in 2007 did not pay for the video they saw from the Internet.
Recent In-Stat research, Revenue Opportunities Abound Worldwide in Online and Mobile Music Distribution (#IN0804027CM), covers the worldwide market for online and mobile music distribution. It provides analysis of the current online and mobile music marketplaces, emerging opportunities, and results from an In-Stat consumer survey. It includes forecasts for digital distribution sales by region, physical media bought online, and total music sales through 2012.
More information on this research here.
Source: In-Stat
By 2012, 74 year old Doug Morris, CEO of the nearly dead Universal Music Group will require around the clock nursing care and heavy doses of anti-psychotic medication.
Since there wasn’t an MDN take on this one, I’ll add what they would normally have done (practically boilerplate at this point): “Business models that fly in the face of the human nature are doomed to failure”.
In all fairness, the ‘boilerplate’ take isn’t directly related to the story, but it is relevant, for it defines the reason why digital downloads, (at this point, mostly synonymous with iTunes Store) are where they are and why they’re going where they’re going.
It boils down to choice: individual tracks, vs. album. As argued here (by MDN, as well as others), album is an artificial construct, designed by the labels to extract more profit for essentially the same product. Bundling (selling value together with stuff that has no value and charging a lot more than for only valuable stuff) worked well when the other choice was not available. It is clear that this isn’t working.
There are many extremely valuable works of art presented in the form of an album. Many talented artists, forced to use the artificial construct of the album, went ahead and created wonderful form of art within this construct. Obviously, 48 minutes (actually, two blocs of 24 minutes) couldn’t have possibly been the exact choice for so many vastly different artists to express themselves in. They used the form (the artificial construct) and filled it with their creative work. When CD came along, the form suddenly expanded to (up to) 79 minutes of contiguous time. Creative artists adapted and some wonderful works of art came out.
None of this proves that album was a valid idea. These works of art are so rare in the sea of other crappy, filler-filled releases, they just prove the point. The rapid emergence of iTunes as No. 1 music seller in the US (digital or otherwise) proves that consumers are not that much fond of album concept anyway.
Four years should actually be enough for CD to pretty much die in the US and the developed world. Elsewhere in the world, it’s a different story…
“Digital piracy continues to represent the primary challenge to online music service providers,”
Huh? Digital piracy continues to represent the primary challenge to ANYONE trying to sell music, not just online services.
@predrag
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are you applying for a job at mdn?
To Ralph (from Berlin): As much fun as it would be working for MDN (especially writing some of the takes), I’m rather content where I am now.
And to add to Spark’s comment, I would argue even further, that digital piracy represents the primary challenge to the OFFLINE (i.e. CD selling) providers; Fairplay effectively protects the music from casual piracy and it is casual piracy that is causing the rapid decline in CD sales. As for DRM-free music, I would very much love to see some study examining the percentage of those that is shared, as opposed to percentage of ripped CDs that end up shared. I would not be surprised if DRM-free downloads (especially those from iTunes) end up lot less on the sharing services than ripped CDs.
Interesting information, but is it actually worth $3,495? That’s the price for this 26 page research document. Predicting the future ain’t cheap!
Ask any meteorologist.
I disagree that it will take that long to get to 40%. I really believe we’re moving much faster than that. I see us at 40% within 2 years.
Not too ballzy a call really, considering how annoying CD technology and ‘crap song’ purchases have become. We all want download. I do believe that we’ll see competitors to our beloved itunes, but I’m all for competition, anything to keep the cost of music down in a garage band world
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