Digital music that can be downloaded from wireless or online services will become more popular over the next five years, according to an IDC report released early this month. The combined revenue raised by music service providers (MSP) is expected to reach $202 million in 2010, contributing a whopping 30 per cent to total music sales that year.
To reach the projected figure, the market for digital music will have to grow at a compound annual rate of 82.5 per cent from the $10 million produced last year. Growth in the wireless and online music services will be driven by a number of factors.
Broadband penetration is expected to increase from 33 per cent in 2005 to 60 per cent in 2010. High-speed Internet will make downloading music from online providers more convenient, hence boosting the popularity of MSPs.
Also contributing to the growth of online music services is the increasing availability and accessibility of portable MP3 players. While IDC recorded only 1.95 million MP3 units that were shipped to Australia last year, analysts predict shipments to reach 3.52 million by 2010.
The paid online music environment currently has several advantages over the wireless music environment. However, Sophie Lo, IDC analyst for Consumer Digital Markets, stressed the importance of music servers as revenue generating avenues for wireless operators.
Voice call charges are limited by capped price plans and close price competition, she said, and wireless operators must look beyond voice revenue for revenue growth.
And while current mobile technology may not be terribly user-friendly, 3G technology will continue to advance and pervade the market. IDC expects revenue generated by wireless music services to catch up with that of paid online downloads by the end of the decade.
Whether wireless music services will become more popular than their online counterparts is a different question. According to Lo, this will not be possible for a long time yet.
"There are a lot of issues that wireless services have to overcome before overtaking online services," she explained. "Wireless platform is not the ideal platform for hosting a lot of music, [while] iTunes has a catalogue of over one million songs."
As such, wireless music providers will tend to host only popular mainstream songs, while paid online services will continue to cater to a wider range of musical tastes. Resellers also stand to benefit from the growth of both sectors, especially if they are able to aid consumers in adopting the different flavours of digital music.
An IDC survey conducted in 2005 revealed that 31 per cent of Australian home consumers are completely ignorant to where digital music can be downloaded from. Apple clearly dominated the market, with over 40 per cent of survey participants subscribed to iTunes. The remaining participants were spread over services such as Telstra BigPond music (20 per cent), ninemsn (9 per cent) and other smaller services.
Brand recognition is a major factor in the success of iTunes and iPods, said Lo, and consumers need to know about other digital music sources before MP3 units that support other formats, such as wma and Atrac, gain popularity.
"There is a strong correlation between electronic content and electronic devices," Lo said. "Resellers should provide some very basic consumer education to show consumers how to [access electronic content] from searching for music, to downloading, to listening."