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Online music not such a money spinner

Financial forecasts for web sales cut as supply fails to meet demand

Though new internet music services this past year have sparked headlines, they have failed to fuel a much faster uptake of online music purchases, according to Jupiter Research analysts.

Online CD sales in the US will remain essentially flat in 2003, at $750m, or seven percent of the entire recorded music market in the country, according to research presented by Jupiter analyst Lee Black.

But Black does forecast long term growth for online music sales, whether they're downloaded tracks or CDs bought on the web. By 2008 he anticipates that these sales will be worth $3.3bn, and the internet will account for 26 percent of music spending in the US. This is down from Jupiter's previous forecast of $5bn by 2007.

Black believes that the problem may lie, not with demand for music online, but with supply. "I talked to all the various players, the retailers, the online services, to come up with the figures," he said, "but essentially, unlike what might be expected in other types of markets, supply has not quickly risen up to meet demand".

Legitimate services such as Apple's iTunes Music Store have suffered at the hands of restrictive licensing rules from copyright owners which is curbing consumer enthusiasm.

However, the biggest problem facing paid-for services like the Music Store and rival Pressplay, is the free peer-to-peer file swapping sites. Only 17 percent of adults say the threat of legal action from the recording industry has led them to cut down on illegal file sharing, according to Jupiter.

Jupiter's analysts say that the situation is much the same as in the US across the globe, stating that online music in Europe has been "stuck" in much the same way it is in the States. Indeed, Apple has had to delay the launch of the iTunes Music Store in Europe because of the requirement to meet complex licensing terms over here.

On the bright side Jupiter does believe such problems should start to be resolved, with online music purchases growing from just nine percent this year to 48 percent in 2008.

Related links:
Apple iTunes Music Store
Jupiter Research
Pressplay


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