The Australian recorded music market will continue to contract over the next five years, according to gloomy new analysis from PricewaterhouseCoopers (PWC).

The consultancy today (Aug. 5) released the latest edition of its annual Australian Entertainment & Media Outlook, which examines issues that will influence the local industries through to 2012.

In its music analysis, PWC states that the recorded music market fell by 10.6% in 2007 and this year will decline a further 6.8% to be worth $795 million Australian ($729 million) at the end of 2008. All told, the consultancy expects the market to contract at a compounded annual growth rate (CAGR) of 1.5% through to 2012.

According to PWC, the "rapid decline in physical recorded music sales is not matched by the growth in digital music downloads and ringtones". The fall in the volume of CDs sales plus discounting by retailers is also impacting margins, the report adds.

PWC believes that the overall Australian entertainment and media sector will continue to enjoy growth and by 2012 will be worth $31.2 Australian billion ($28.6 billion). However, David Wiadrowski, lead partner for technology, information, communication and entertainment, says the sector must continue to innovate if it is to ride out the current economic downturn.

"If entertainment and media businesses were to enter the difficult days ahead without thoughtful, innovative strategies to maintain share, it could be harder for them to recover than from a cyclical economic downturn," he says.