Heading into its ninth annual Plug.IN Conference and Expo, which starts today in New York, host Jupiter Media Research has issued its five-year digital-music forecast for 2004. The report claims that

Heading into its ninth annual Plug.IN Conference and Expo, which starts today in New York, host Jupiter Media Research has issued its five-year digital-music forecast for 2004. The report claims that the U.S. digital-music market will nearly triple this year but says the music industry as a whole will have trouble matching the peak revenues achieved in 1999.

Jupiter forecasts that digital-music sales -- including consumer spending on both á la carte downloads and subscriptions -- will grow to more than $270 million in 2004, with downloads accounting for $158 million. In 2003, the digital-music market amounted to just under $100 million in the face of a declining $11.9 billion CD business, according to Jupiter's report.

Company analyst David Card says Jupiter modestly increased its near-term forecast for downloads. However -- in line with last year's forecast -- he projects that subscription revenue will surpass á la carte download revenue sometime in the next five years.

The report says that subscriptions and downloads will combine to reach $1.7 billion in revenue in 2009, or 12% of U.S. consumer music spending. Although digital markets and online CD sales will drive a return to positive growth in the music industry, neither is expected to restore music spending to its 1999 height of $14.6 billion.

"Ripping, burning and piracy have had negative effect on CD sales, but a bigger effect is that music is competing with other entertainment forms such as DVDs and video games," says Card.

Jupiter's report states that the "forward compatibility" of CDs with new music-playing platforms such as computers and MP3 players will preserve the medium as the preferred format for years to come. The U.S. music industry, however, must manage digital music as one of a series of incremental revenue streams, along with licensing for ringtones, games and advertising.

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