Digital music not balancing out falling CD sales

10 Jan 2008

Although digital music sales are rising they are still niche, with 2007 revenues representing a fraction of the income lost from the decline in CD sales, a new report reveals.

2007 was a record year for revenue decline in the European music market and although digital music spending was higher than ever before, it represented just 13pc of the drop in CD sales, according to analyst firm JupiterResearch.

Jupiter claims that European digital music spending in 2007 was €401.2m, a 63pc increase over 2006.

However, although the European market trails the US by approximately two years it will gain momentum with spending on digital music helping to halt the decline in music revenues, culminating in €2bn digital music revenues by 2012.

Long-term drivers such as MP3 player adoption and consumer awareness will play a role.

Jupiter is also predicting a more adventurous approach from major record labels responding to the current underwhelming level of digital growth and a strong physical music decline.

“Digital music is currently failing in its three key strategic aims of successfully competing with free music, offsetting declining CD sales and generating a format replacement cycle,” says Mark Mulligan, European vice-president at Jupiter Research and lead author of the report.

“The music industry has, however, found a new dynamism and willingness to experiment, which will help digital music fulfil its promise,” Mulligan concludes.

“Initiatives like Nokia’s ‘Comes With Music’ with Universal Music are indicative of a brave new approach that will help free digital music from its chains.”

By John Kennedy