Digital Music To Hit $5.3 Bln By 2012?

Yankee Group predicts seismic shifts in the music business – revenue will rise, but big labels will become marginalized.

Speaking at CES, researchers Yankee Group predicted some major changes for the music business over the next few years.  It’s no secret that physical CD sales have been declining rapidly, and even a rise in digital sales hasn’t been enough to offset that. The good news is that digital music saleswill continued to rise, they predict, with US sales alone hitting $5.34 billion by 2012 from $1.9 billion last year.   The bad news, at least for record labels, is that much of that money willgo directly to the artists, as labels become more and more marginalized.   "No industry has felt the impact of the Anywhere Consumer more strongly than the recording industry," saidMichael Goodman, director of digital entertainment at Yankee Group. "It’s not just that the record labels are facing declining revenue; rather, the basic relationship between recording artists,record labels and consumers is in major flux. As bands retain ownership of their music, the record label’s role shrinks while the role of technology vendors and online music stores grow."  So what, exactly, do they believe will happen? For one, the much-heralded mobile download market won’t be all that everyone thinks – online downloads will still vastly predominate, withonly 9% of people using their phones as mobile players. Secondly (and to no one’s real astonishment), the real market will be in single tracks, rather than whole album downloads.   Therecommendations are that wireless carriers push the PC as the primary music distribution channel, and that record labels forget digital rights management, and focus instead on watermarking tracks.