The Digital Music Revolution

Discussion
Oct 04, 2005
George Anderson

By George Anderson

Thank you, Steve Jobs.

According to the International Federation of the Phonographic Industry (IFPI), the digital music market has tripled in the past year and now represents
six percent of total industry sales.

Apple Computers’ iPod and iTunes Music Store download service have helped increase the visibility and ease of obtaining digital music legally. In
the first six months of the year, global consumers spent $790 million downloading tunes, compared to $220 million for the same time period from the year prior.

IFPI Chairman and CEO John Kennedy said in a released statement: “The digital music boom is continuing and it is growing at an exciting pace for
the music industry, for online retailers and for consumers. More and more people in a growing number of countries are turning to the new legal ways of downloading music on the
Internet or via mobile phones.”

While downloaded music is growing, purchases of pre-recorded compact discs is continuing to fade. The IFPI reports that “physical music” dollar
sales fell 6.3 percent for the first six months of 2005 compared to the same time frame a year earlier. Unit sales were off 3.4 percent.

In the U.S., physical music sales were off 5.3 percent in dollars and 5.7 percent in units.

Moderator’s Comment: What are the implications of the IFPI report for retailers in the music business? Where do you see the digital music and entertainment
business heading?

George Anderson – Moderator

Please practice The RetailWire Golden Rule when submitting your comments.

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7 Comments on "The Digital Music Revolution"


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Rick Moss
Guest
15 years 4 months ago

I’m enjoying the speculation by Don and Greg. Here’s one: how about music rentals? With the plummeting cost of memory, pretty soon, digital music players will be practically disposable. Suppose you could walk into a music rental store and choose from a selection of thousands of music compilations… 500 of the Johnny Cash’s late-life recordings or 1000 Indian Ballywood songs? Just like DVD’s, you could rent the pre-loaded flash memory player and disposable headphones for a weekend. Or pay for the “commuter package” and rent it for Monday-Friday. Compilations could be pre-produced by the record companies, or you could use in-store kiosks to load your own.

Although downloading is the inevitable wave of the future, there will be a large segment of the population who will ALWAYS feel intimidated with the technology. If they can rent a business card-size player that comes complete with an entire collection of music, the technology curve may never need be scaled.

Greg Coghill
Guest
Greg Coghill
15 years 4 months ago

Don Delzell raises a great thought in his comments above. A retail location to walk the customer through the process could certainly fill a need, at least for the next several years. I would like fast, easy, and dependable locations to browse and download, and maybe discuss. However, considering the margins are slim even for digital music retailers, the idea would be best implemented by an existing retailer in a related or sometimes non-related category. Starbucks has dipped its toes into such strategies but did not develop or perfect it. This might be a great approach for the Apple Store (although that may simply shift sales from online to brick and mortar, adding to their costs (?)) Also, an idea like this might be good for Airline media centers on the back of seats, or waiting areas in the terminal. Many possibilities. Good thoughts, Don.

Greg Coghill
Guest
Greg Coghill
15 years 4 months ago

While it is too early to make any strong predictions about the digital music market, digital music will certainly replace hard copy versions within the next ten years, probably sooner. That’s a given. If I were to make a preliminary prediction, the market share for digital distribution will explode while gross revenue from the music industry overall will drop. My advice to hard copy music retailers, adapt or get out. It might be a good idea to just get out.

Don Delzell
Guest
Don Delzell
15 years 4 months ago
Hey, for all I know, this may already exist. What about download stations in-store? What if there were a bank of sit-down booths (OK, make them sexy and glass walled, with neon around them) where consumers could dock their iPod or other digital hardware, sample music, and then pay to download? Sort of like an ATM. The menu could be set up to allow them to access the top 5 pay download sites. For those people not already “members” at these sites, “instant” membership could be available. The store would have a roving “expert” available to help, providing guidance. Music stores are the distribution point for product. Yes, people can download off their computers at home. But many will not choose to do so. Besides, it may be easier and more enjoyable for them to do so in a retail environment. The real upside here are the vast ocean of CD buyers who really do not want to explore the online download world on their own, but would if someone was there to hold their… Read more »
Camille P. Schuster, PhD.
Guest
15 years 4 months ago

Consumers want an opportunity to test the music before spending their money to purchase it. Consumers also want to purchase the songs they want, not the ones the industry puts together on a CD. iTunes provides exactly that option to consumers — they can test a 30 second segment of a song and purchase only those songs they want. Now, when will similar options be available to consumers for television shows, videos, radio programs, concerts, etc.?

Consumers want choices so they can purchase the option to view what they want when they have time. Whoever manages to satisfy that need will help the rest of the entertainment industry grow as well.

Mark Lilien
Guest
15 years 4 months ago

Three critical trends will continue to reduce physical music sales: (1) America is getting older and older people don’t buy as much music as younger people; (2) it’s easier to download than shop for physical music; (3) it’s easy and cheap to copy music illegally. It’s hard to beat convenience when it’s cheaper and it’s impossible to beat time and age. Physical music retailers are plagued by low margins, shoplifting and returns restrictions.

Kevin White
Guest
Kevin White
15 years 4 months ago

Digital music is great if the consumer knows what they want but it excludes a major portion of the business, impulse. Since women buy 40% of all music, and 35% is by consumers over 40, there is a strong need for a regular stocking section.

The key is for retailers to find the right mix and location.

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