Industry's Digital Future Explored At MidemNet

Digital music will claim 33% of the global music market by 2008, suggested analysts today (Jan. 24) at MidemNet in Cannes.

Digital music will claim 33% of the global music market by 2008, suggested analysts today (Jan. 24) at MidemNet in Cannes.

During a presentation titled "get out of the plastic business," Josh Bernoff, principal analyst at American firm Forrester Research, said that consumer demands over the next four years should lead to digital music distribution challenging the market domination of the physical CD format. Internet portals, cable and telephone companies, artists and device makers would be best placed to reap the benefits of a swing towards digital distribution.

Speaking to Billboard.Biz after his presentation, Bernoff says that his intent is not to foretell the end of the CD as a preferred sound carrier, but to stress to the industry that "it is the right time for labels to rapidly embrace the music online world.

"CDs will remain for a long time the industry's main source of revenues," he says, "but the [prerecorded CD] market will be 30% smaller five years from now, and online music is rapidly growing."

Bernoff says he is optimistic about the development of the legitimate online music market to date. "The launch of iTunes and Napster in 2003 in the U.S. has shown the direction."

But Bernoff's described scenario would spell a gloomy picture for retailers, distributors and particularly disc manufacturers, whose business would likely to be phased out along with the format. "Time to think about getting out [of that business]," Bernoff told delegates.

Forrester's market research also suggests the proliferation of download services will continue through 2004, followed by an essential shakedown of the market in 2005/2006. In the U.S., Bernoff warns, the market is currently overwhelmed by as many as three times the number of competing download services the market can realistically support. Consolidation is inevitable, he says.

Digital piracy in the U.S. alone is currently costing an estimated $700 million in lost sales, according to Forrester. By 2005/2006, music sales are anticipated to rebound, as subscription services take off.

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