Legal Downloading To Drive Out CDs And DVDs
The recording industry is yet to accommodate the concept of paid-for downloading but this will change, thereby sounding the death knell for physical music media, says a new study from Forrester Research.
The increasing popularity of broadband has also led to a rise in online movie downloading but as with the music business, film distributors seem to be the missing the point in regarding the internet as a threat rather than an opportunity (see Downloading Poses Little Threat To Movie Business).
“The shift from physical media will halt the music industry’s slide and create new revenues for movie companies, but it will wreak havoc with retailers like Tower Records and Blockbuster. As a result, we’re about to see a massive power shift in the entertainment industry,” said Josh Bernoff, principal analyst at Forrester. “Entertainment executives focused on the short term – fighting piracy – are losing track of the long-term consequences. On-demand services are the future of entertainment delivery. CDs, DVDs, and any other forms of physical media will become obsolete.”
Lately, there does seem to be a realisation that the only true way to confront the challenge of internet piracy is to set up legitimate online services and create new revenue sources (see Online Music Market Growing Slowly). Apple led the way with its iTunes Music Store which launched in May (see Music Downloading Proving Increasingly Popular) and EMI has now made most of its catalogue available online.
Forrester claims that in the next nine months, at least 10 Windows-based music services will emerge, providing an alternative to unlicensed file sharing. Consequently, it is estimated that music sales will increase by more than half a billion dollars in 2004 and as consumers become more comfortable with the online medium, subscription services will take off.
The film industry has the advantage of being able to avoid the pitfalls that have beset music distributors. Movie piracy is three years behind illegal music downloading and studio bosses are already analysing the potential of on-demand delivery services such as cable video-on-demand and internet distribution. Forrester calculates that on-demand movie distribution will generate $1.4 billion by 2005, while revenue from DVDs and video tapes will decline by 8%.
“Music and studio executives are finally beginning to understand that they must create new media services through channels that consumers will pay for. Consumers have spoken – they are tired of paying the high cost of CDs and DVDs and prefer more flexible forms of on-demand media delivery,” said Bernoff. “Additionally, technology trends like increased broadband adoption and cheap, widespread storage have made it possible for consumers to easily manage their digital entertainment at home.”