Biz Cautious On Digital Distribution

Digital execs look to sub services for growth.

BMG North America president/COO Charles Goldstuck told attendees of the Jupiter Plug.In conference today (July 26) in New York that the CD -- not digital distribution -- will dictate how the recording industry behaves from a structural standpoint.

"As goes the CD, so goes the industry," he said in the morning keynote session at the confab, which wraps tomorrow.

Goldstuck's comments came on the heels of a tepid sales forecast for digital music from Jupiter Media Research senior analyst David Card.

As previously reported, Jupiter is calling for the size of the digital music business to nearly triple this year to more than $270 million. However, the firm is not expecting digital growth to help return the music business in the near term to its 1999 peak levels.

In his opening remarks today, Card cautioned attendees that adoption of digital music will not represent a format shift for the industry over the next five years. He advised labels and service providers to instead look at digital distribution as an incremental revenue stream comparable to the licensing business.

Questions about just how big a role digital distribution will play in the revenue equation for the music industry dominated talk at the confab.

In the day's opening panel, executives from Loudeye, MusicMatch, MusicNet, RealNetworks and Sony Connect cautioned that the 99-cent singles download business is not a strategy in and of itself.

Connect GM Jay Samit said that à la carte track sales make meaningful money only if they have corporate support through partners like McDonald's. MusicMatch CEO Dennis Mudd said 99-cent singles can be used to sell consumers on other services, such as subscriptions.

Enthusiasm for digital subscriptions is on the rise. MusicMatch earlier today announced a new subscription offering. Jupiter said in its forecast that it expects subscriptions, not downloads, to drive the digital music market through 2009.

Goldstuck said Microsoft's anticipated entry into the digital music market later this year will be the next major "threshold event" for the industry. He noted that he expects Microsoft's subscription portability solution to help grow the market.

"This development will really be a shot in the arm for the subscription service model vs. the à la carte model," he said.