November 9, 2011
Online Music Sales Trending Upward
Gartner, a technology research firm, expects online music revenues to be up 7 percent this year to $6.3 billion. Services such as iTunes and Spotify are leading the trend as they gain momentum.
Gartner forecasts that by 2015 online music spending will rise to more than $7.7 billion from $5.9 billion in 2010. They also predict in the same period that music CD revenues will fall from $15 billion to $10 billion.
Reuters notes that CD sales are especially hurt by music piracy as well as paid-for-online distribution and will continue to decline faster than the increase of digital online sales.
Mike McGuire a Gartner analyst said, “The music industry was the first media sector to feel the full impact of two major forces – the internet and technology-empowered consumers. It has staggered through the first decade of the 21st century and entered the second bedraggled financially and facing a powerful set of intermediaries, which are creating borderless global ecosystems that defy the industry´s previous notions of control and monetization.”
Services like iTunes are encouraging consumers to purchase their music, instead of illegally downloading pirated music. Meanwhile the big labels are making more money from live concerts forcing more artists to tour on the road.
Services that personalize music, like Pandora, will decline from $2.17 billion down to $1.46 billion. According to PCMag, personalization services must generate long-term revenues in order to offset licensing costs. Pandora competitor Slacker has moved from a personalization service into more of a subscription service.
McGuire said, “The primary stakeholders in the music industry are facing wrenching changes and a somewhat uncertain future. However the next four to five years portend solid growth.”
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