Put the champagne in your fridge, you’re going to need it soon… As I wrote about the final death blow for the recording industry as an effect of the Eminaem/UMG case, this might be a bit of a good news, so pop the corks:
A new study by IE Market Research called the “Global Digital Music Forecast” for online, mobile, and subscription channels predicts increasing music retail revenues up to $32.5 billion by the end of 2014.
Even considering recent drops like the 7% last year to $17 billion, this still looks like a little, sparkling faint sun beam on the horizon.
How does IE come to this conclusion?
Today there are some 832 million users worldwide of paid digital music offers, and the study estimates that number is to almost double to 1.555 billion in 2014. As a result, digital music revenues will increase from a current $4.82 billion to $21.3 billion in this period.
But who are this lot? Where do all this new buyers come from (cynical Bloggers say that maybe Chinese music lovers will suddenly honor international copyright law)? It seems that subscription will lead the way on both online and mobile music channels, although the number of music users downloading their music will increase from 507 million in 2009 to over 1 billion in 2013.
There are a number of reasons why we think that this growth toward a blended medium is reasonable to expect in the next five years:
1. While the recession will slow growth in paid digital music users, mobile downloads of music are generally more expensive, both in terms of traffic and content, compared to broadband downloads.
2. Given current saturation levels in mobile-centric developed markets (such as Western Europe), major growth in mobile subscribers is happening in developing markets. In these markets, both single download users and mobile subscriptions is a harder sell given the dominance of prepaid mobile subscribers in these developing markets.
3. In mature markets (such as Western Europe and North America), broadband penetration is already high and given broadband access pricing over the fixed network is significantly lower in these markets, we do not see uptake of Over the Air (OTA) music downloads, which tend to have a higher market share in markets such as Japan and South Korea.
Digital Music Retail Revenues to reach $32.5 billion at the end of 2014
IEMR is forecasting that global digital music revenues will increase from their current level of $7.8 billion in 2009 to $32.5 billion in 2014, for a CAGR of 37.1%.
Online digital retail spending (which includes digital downloads of full tracks, albums, music video and streams over the fixed network) was $3.5 billion in 2009. This particular market segment will see retail revenues grow by a CAGR of 33.1% to $13.5 billion in 2014. Trends driving this growth over the next five years include:
1. Broadband penetration to become more ubiquitous in developed markets: Our analysis of this market suggests that digital music download and streaming user numbers are strongly linked to fixed broadband penetration in developed markets (with the exception of Japan). With broadband penetration becoming even more ubiquitous over the next five years in these markets, we think that online retail sales will increase substantially over the forecast period.
2. Illegal file sharing becoming increasingly hard: While the recession will support illegal file sharing and free ad-supported models over the short term, ISP based legislation in both the United States and Europe will mean that users will increasingly have to pay for their music downloads.
Digital Music Revenues at Record Companies to reach $21.3 billion at the end of 2014
IEMR is forecasting Record company revenues from downloads of full tracks, albums, music video and streams over the fixed and wireless network will reach $21.3 billion in 2014, from our current estimated $4.82 billion in 2009.
We think that over the next five years, record companies will do a better job of increasing their subscription customers (subscription revenues will increase to $1.8 billion for record companies) and they have also seen the writing on the wall in terms of online access and will begin exploiting this channel more thoroughly over the forecast period. This will result in increased online revenues from digital music downloads of $8.8 billion in 2014 (for a CAGR of 31.2%). Trends driving this growth over the next five years include:
1. Music applications: Innovative music applications have developed over the past 2-3 years that will be exploited by record companies. These apps have additional interactive features, games and information that are proving very popular with customers and will likely be dominated by the record industry, despite recent moves by individual artists to “go solo”.
2. Subscription Pricing models: We think that record companies will continue to experiment with various subscription pricing models. These are currently available with some labels that allow a certain number of downloads per month with links available for “all you can hear” purchases. We think, however, that subscription prices will have to drop significantly for this type of bundled proposition to work in favour of record companies.
As for Western Europe they state:
Digital music paid users in Western Europe to increase from 87.4 million in 2009 to 173.2 million in 2014
We are estimating that the total number of paid users of digital music in Western Europe was 87.4 million in 2009, and this number is going to increase to 173.2 million by the end of 2014, for a Compound Annual Growth Rate (CAGR) of 13.8% (previously 11.7%).
Online single download users to increase from 67.6 million to 136.4 million over the forecast period, 2010 – 2014
In Western Europe where broadband penetration is high, the majority of digital music users download music online rather than through mobile networks. We forecast that online paid download users will increase from 67.6 million in 2009 to 136.4 million in 2014 (CAGR of 14.3%, previously 12.7%). Growth of mobile download users will be lower at a CAGR of 9.1%. The number of paid music download users using their mobile devices will increase from 18.5 million in 2009 to 30.6 million in 2014.
Digital music retail revenues in Western Europe to increase to $4.8 billion by the end of 2014
We forecast that digital music retail revenues in Western Europe will increase from $1.3 billion in 2009 to $4.8 billion in 2014, for a CAGR of 31.4%. As broadband penetration becomes more ubiquitous and illegal file sharing becomes more difficult, revenues from online single download users will grow dramatically over the next several years. We expect that retail revenues from online paid download users will increase from $0.804 billion in 2009 to $3.1 billion in 2014.
find an excerpt of the research here: