The Online Digital Music Market – Heady Days Ahead

(Via eMarketer) While the Kazaas and the Groksters and eDonkeys of the world will continue to be the underground nemeses of copyright holders, legitimate online music services such as iTunes, Napster, Rhapsody and others are competing with P2P networks, and an increasing percentage of all music sales are being conducted online. Estimates of online digital music sales show a sector expected to grow exponentially over the next few years. From vinyl to CD, from CD to MP3, music listeners are once again changing the way they buy, store, share and listen to music. Few industries have had to adapt so quickly and so frequently to technological change as the music industry has over the past 20 years, but the latest change is perhaps the biggest transformation yet. "Widespread broadband adoption combined with the digitization of music and the emergence of portable digital music players is fundamentally changing the music industry," said Ben Macklin, Senior Analyst at eMarketer.

Broadcast radio still dominates, but its audience is declining. AOL recently opened up a greater portion of its online content to non-AOL subscribers and the ISP has partnered with iTunes and MusicNet to create a free and paid music service that all Internet users can access. Yahoo! Music (including MusicMatch) closely follows AOL and iTunes comes in a distant third in the popularity stakes. There is a strong correlation between broadband and downloading music.By the end of 2005 there will be over 41 million broadband households in the US and an almost equal number of digital audio players in the market. iTunes and iPods go hand in hand — two peas in an iPod, one could say — and with the recent phenomenon of podcasting and the growing popularity of satellite radio, on-demand audio entertainment has moved to the next level." Legal clarity, widespread broadband, increasing consumer awareness, compelling online music services, and the popularity of digital audio players all point to an online music market with a promising future.