[JPL] Report: Digital To Lead Music Sales In Five Years

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Wed Feb 20 10:37:30 EST 2008

Report: Digital To Lead Music Sales In Five Years

February 19, 2008 - Digital and Mobile

By Jennifer Netherby, L.A.

Digital music sales will surpass CD sales in five years, according to a new
report from Forrester Research ominously titled "The End of Music As We Know

Forrester predicts digital sales will grow by 23% a year through 2012, when
they will reach $4.8 billion in annual sales. CD sales will slide to $3.8
billion in 2012, according to the report. However, digital growth won't make
up for CD declines over the next five years.

Forrester surveyed 5,000 consumers in the U.S. and Canada. The company found
that MP3 devices are being underutilized, with just 57% of their capacity
filled. Forrester also predicts that DRM-free downloads will extend to Apple
iTunes and other services and onto social networks, where friends could sell
friends their favorite songs.

Forrester believes digital downloads will dominate sales in coming years,
but sees some growth potential for online music subscription services, which
it believes will grow to $459 million in revenues by 2012. Ad-supported
downloads will fail to take off because of DRM-free music and on-demand
streaming from sites like imeem.com, according to the report.

"The industry has to redefine what its product is," Forrester Research VP
and principal analyst James L. McQuivey said in a statement.

"Music executives have spent years tracking CD sales," he continued. "But
the artist is the product -- not just the source of it. New forms of revenue
will come from unexpected sources. For example, the industry has failed to
capitalize on the growing popularity of video games such as 'Guitar Hero'
and 'Rock Band.' In a market where musicians are happy to sell a million
copies of a CD, a videogame market where titles can sell five million copies
is enough to motivate even the most depressed music executive."

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