Digital music sales double but CD sales not in danger

27 Jul 2004

Digital music sales are expected to double this year and are predicted to be worth US$1.7bn within five years, according to forecasts from US-based JupiterResearch. However, digital music still will not replace CDs or bring music sales back to its 1999 peak, the company said.

This year, digital music sales will rise to more than US$270m, representing growth of over 100pc on last year’s figures, JupiterResearch said. Digital music’s boom is helping the music industry in the US to return to growth following four years of reduced sales. Despite further impressive growth forecast by the market watcher, by 2009, the digital music category will account for 12pc of total consumer spending on music, suggesting that it will not replace the CD format within that time.

JupiterResearch claimed that over time, revenues for digital subscription services will outpace those of digital download. The latter will remain a market for potential buyers to sample music before purchasing the actual CD in the near-term. JupiterResearch VP and senior analyst David Card commented: “The so-called celestial jukebox is in sight. But for now, it will appeal to music aficionados. The US music industry must manage digital music as one of a series of incremental revenue streams, one that is in the same scale as licensing (eg, ringtones, games and advertising).”

More good news on the hardware side of things: US shipments of MP3 players will grow by more than 50pc this year to clear the five million mark. JupiterResearch has predicted that this rate will continue and shipments will keep growing almost 50pc per year for the next several years. “A lot of the action in hard drive-based devices will be at the low end in terms of price and capacity that will help drive the market,” said JupiterResearch VP and research director Michael Gartenberg.

Interestingly, given the trend for newer digital music devices to come with increased storage capacity, Gartenberg cited JupiterResearch survey data which indicated that 77pc of consumers who would purchase a portable music player would want no more than 1,000 songs on a player at any given time, regardless of the size of their music collection.

By Gordon Smith