Downloads to Surpass CD Sales by 2012

Cambridge, MA (February 21, 2008)--A new forecast by Forrester Research, Inc. paints a gloomy picture for the recorded music industry. Cheerfully entitled "The End Of The Music Industry As We Know It," the report predicts that digital music sales will skyrocket over the next few years, yet will still not offset plunging CD sales.
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Cambridge, MA (February 21, 2008)--A new forecast by Forrester Research, Inc. paints a gloomy picture for the recorded music industry. Cheerfully entitled "The End Of The Music Industry As We Know It," the report predicts that digital music sales will skyrocket over the next few years, yet will still not offset plunging CD sales.

Half of all music sold in the US will be digital in 2011 and sales of digitally downloaded music will surpass physical CD sales in 2012, according to the new report. Digital music sales will grow at a compound annual growth rate of 23 percent over the next five years, reaching $4.8 billion in revenue by 2012, but will fail to make up for the continuing steady decline in CD sales. In 2012, CD sales will be reduced to just $3.8 billion.

The Forrester report is based in part on a survey of more than 5,000 consumers in the US and Canada.

Among the drivers of Forrester's five-year forecast for music sales is MP3 player adoption. The average MP3 player is only 57 percent full, suggesting that the devices are underutilized. Further, households with more than one MP3 player are buying yet more of the devices.

With the four big music labels now committed to eliminating digital rights management (DRM), DRM-free music will extend beyond pioneer Amazon.com to Apple iTunes and the other major online music sites, the report predicts. Additionally, DRM-free music enables every social networking profile page to immediately become a music store where friends sell friends their favorite tracks.

Forrester believes digital downloads are the logistical mass market for the future--easy to find, easy to buy, and easy to listen to, regardless of the device. On the other hand, subscription music services will show modest growth, reaching just $459 million in revenue in 2012, according to Forrester's projections, while experiments in ad-supported downloads will be silenced by the powerful combination of DRM-free music and on-demand music streaming.

Forrester Research, Inc.
www.forrester.com