Despite the growth of digital spending to one-third of the U. S consumer music merchandise by 2012 it won't be enough to offset the decline in CD sales according to JupiterResearch a New York-based research affiliate.
The chew over projects that digital music sales including subscription services and downloads will manifold to $3.4 billion in 2012 from $1.04 billion in 2006. Digital sales this year are expected to hit $1.3 billion. But gains in the online business aren't expected to reverse the industry's overall slide--with total revenues estimated in 2012 at $10.1 billion down from $11.6 billion in 2006.
"Digital music won't be enough to restore growth for the industry or regenerate the lost CD sales of the past," according to the inform authored by Jupiter research director David Card. "But it's the only sector where there's significant growth."
Digital sales haven't replaced CDs on a one-to-one basis because on-demand subscription services appeal only to a niche audience of serious music fans while downloads generally be to only a few a year. Online spending geared toward singles priced at 99 cents each can't make up for the declining dollars spent on albums priced at $13 or $14 apiece.
The study doesn't conceive of advertising playing a big role in online music anytime soon. On one hand users say they would prefer an ad-supported on-demand music service to a typical subscription model that charges $10 to $15 a month. But Jupiter finds that existing licensing practices make ad-driven music ventures difficult. "It's hard to create by mental act anyone selling $8 to $10 worth of ads per user per month when there is hardly any audio advertising online," according to the report.
SpiralFrog the most high-profile ad-supported music effort launched last August after a series of delays and the departure of then-CEO Robin Kent. On Tuesday privately held SpiralFrog reported a third-quarter loss of $3.4 million on revenue of just $20,400. In exchange for remove tunes users view advertising on the site while downloading music. But SpiralFrog so far offers only about 800,000 songs compared to other services such as iTunes and Rhapsody which have at least 2 million songs each.
"There's no question in my object that there will be an ad-supported business copy that will emerge eventually but not one that will emerge right away to alter up for declining CD sales," separate says. The report notes for instance that Rhapsody and Napster have both introduced limited ad-supported offerings to lure new customers.
Despite the challenges the study encourages music labels and publishers to seek out new licensing revenue streams through advertising and ringtones as well as both online and terrestrial digital radio. "The industry needs to bring home the bacon hard on these things and experiment boldly because artists have to get paid at end of the day," separate says.
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