Two years ago I was confident that it would happen — more than $1 Billion in sales of digital music for 2005. This was triple the year before. For 2007, the number rose to $3B and represented 15% of total music sales up from less than 1% in 2003. People are willing to pay for music if it is offered to them in a contemporary way — i.e. digital. Single track downloads, the most popular digital music format, grew by 53% to 1.7 billion. iTunes is the giant but there are more than 500 legitimate digital music services around the world offering more than 6 million selections. It goes without saying that sales of music CD’s continues to fall sharply.
In spite of the rapid growth, digital music still represents just 15% of the total music business (compared to 7% for newspapers, 3% for films, and 2% for books). The shift to a predominantly digital music industry is inevitable but there are some impediments. There is a non-trivial amount of piracy through various peer-to-peer services. It will take time to change the habits and attitudes of those who do not respect the legitimate need of musicians to make a living and be compensated for their creations and performances.
The other issue is lack of interoperability between services and devices. Apple and Sony and others offer proprietary and incompatible formats. There are dozens of formats to compress music and make it more efficient to store and distribute over the Internet. MP3 is not the best but it has won the war. VHS wasn’t the best format for movies on tape but it dominated. Once a certain critical mass is reached it is hard to reverse. Apple is an exception, so far, and has shown that it can impose a proprietary format and by implementing it in an elegant fashion (iTunes) with devices that are equally elegant (iPods) that it can capture dominant market share. Over time people will demand more compatibility. If we purchase music it is reasonable to assume that we should be able to play that music on any device in our house, in the car, or on a trike.
The industry group that reports the data on music sales and monitors (fights) piracy calls itself the "International Federation of the Phonographic Industry". Does that give us a clue that they are not keeping up with the times?
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