The downturn in the global recording industry and the current lack of legitimate download services have prompted Jupiter Research to cut its forecast for online music spending.
Internet sales of recorded music fell sharply during 2002 with unlicensed file sharing widely held to be responsible (see
Online Music Sales Hit A Low Note). More than one in five internet users regularly download tracks from the web cutting off revenues to record labels (see
Music Downloading Proving Increasingly Popular). With approved digital services such as Apple’s iTunes still in their infancy, analysts are cutting their projections for online music sales.
A new report claims that US online CD sales will remain flat in 2003, at $750 million, while total digital sales, in the form of downloads and subscriptions, are not expected to exceed $80 million.
“The industry is suffering from competition for entertainment dollars, changing demographics, the end of the CD upgrade cycle and piracy,” said Jupiter Research analyst Lee Black.
Jupiter has consistently warned the music industry that it needs to license music downloading sites in order to compete with file sharing services such as Kazaa and Morpheus (see Music Industry Must Embrace The Net, Says Study). This will happen but at a slower rate than previously thought and the online music sales will total $3.3 billion in 2008, equivalent to 26% of US music spending.
The current situation is mirrored in Europe although the report acknowledges signs of change.
“Europe’s online music market has been stuck in the starting blocks for the last few years, but the tide is finally beginning to turn,” said Jupiter Research analyst Mark Mulligan. “EMI’s decision to make most of its catalogue available online is an eye-opener, and while consumer demand remains low and file sharing rampant, the foundation is now falling into place for Europe’s legitimate online music market,” he added.
