The Online Music Market: Downloaded Music Will Outpace Physical Media Bought Online in 2007

SUMMARY

Abstract

The Internet is now a key distribution channel for legitimate digital music sales; and, in 2005, online sales of digital music represented almost 5% of the total worldwide music market. This figure is up from virtually zero percent in 2003. In-Stat's latest report, "The Online Music Market: Downloaded Music Will Outpace Physical Media Bought Online in 2007" (#IN0602972CM), covers the growth of the online music market. It includes worldwide revenue forecasts for music downloads and physical media bought online. An important addition to this report is a worldwide revenue forecast for full-length songs downloaded to mobile phones. Mobile music represents competition for both traditional CD sales, as well as digital singles and albums downloaded to a PC or portable audio player. Therefore, we can no longer exclude this growing opportunity when discussing the online music market. Finally, the results of an In-Stat consumer survey on online music buying and listening habits are also presented.

TABLE OF CONTENTS

• Executive Summary
• Methodology
• Introduction
• Online Services and Content
  • Business and Revenue Models
    • Pay-Per-Download
    • Subscription
  • Types of Services
    • Stand Alone
      • Napster
      • RealNetworks
  • Those Using Online Music to Further Other Business Interests
    • Wal-Mart
    • Microsoft
    • Yahoo
    • Apple
    • Sony
    • Virgin Digital
    • Services Bundled with Carrier/Operator
  • Market Drivers
    • Broadband
    • Availability of Services and Compelling Content
    • Consumer Awareness
    • MP3 Player Market
    • Mobile Phone Industry
  • Industry Challenges
    • DRM Challenge: Interoperability Concerns
    • Piracy
    • Unlicensed Digital Stream Ripping
• TAP Survey: The Earlier Adopter
  • Primary Method of Connecting to the Internet at Home
  • Do You Have a Home Network (Either Wired or Wireless)?
  • Have You Downloaded Music from the Internet?
    • Have You Paid for It?
  • What Music Service Have You Used Most Often to Purchase Music in the Last 12 Months?
    • Ease of Setting Up an Account
    • Ease of Check Out
    • Ease of Finding What You Wanted on the Site
  • What Type of Music Did You Purchase Online?
    • Approximately How Much Did You Spend on Online Music in the Past 12 Months?
  • What Type of Products Are You Interested in Finding in an Online Store?
    • When You Shop for Music Online, Which of the Following Best Illustrates Your Typical
    • Behavior?
    • Which of the Following is of Most Interest to You in an Online Music Store?
    • Which, if Any, of the Following Do You Do with the Music After Downloading It?
  • Which, if Any, of the Following Devices Do You Own?
    • Is the MP3 Player the First One You Have Owned?
    • What Type of MP3 Player(s) Do You Own?
    • What Brand(s) of MP3 Player Do You Own?
  • Are You Planning to Buy an MP3 Player in the Next 12 Months?
    • What Type of Player Are You Most Likely to Buy?
    • What Brand of Player Are You Most Likely to Buy?
  • Would You Prefer to Listen to Your Digital Music on Your Mobile Phone or an MP3 Player?
• Digital Music Forecasts
  • Worldwide Total Market and Online Revenues
  • Physical Media Bought Online vs. Downloads/Subscriptions
    • Regional Segmentation
  • Full-Length Tracks Downloaded to Mobile Phones
    • Regional Segmentation
• The Online Music Market in 2006
  • Portability
  • Legitimate P2P Distribution
  • Digital Radio
• List of Tables
  • Table 1. What Brand(s) of MP3 Player Do You Own?
  • Table 2. What Brand of Player Are You Most Likely to Buy?
  • Table 3. Total Worldwide Music Market vs. Total Online Music Market: 2004 to 2010 (US$ in Millions)
  • Table 4. Physical Media Bought Online vs. Downloads/Subscriptions: 2004 to 2010 (US$ in Millions)
  • Table 5. Regional Distribution of Online Music Revenues: 2004 to 2010 (US$ in Millions)
  • Table 6. Worldwide Revenue for Full-Length Tracks Downloaded to Mobile Phones (Units in Millions)
• List of Figures
  • Figure 1. Worldwide Online Music Market Revenue (US$ in Millions)
  • Figure 2. Worldwide Broadband Subscribers (Units in Thousands)
  • Figure 3. Primary Method of Connecting to the Internet at Home
  • Figure 4. Primary Method of Connecting to Home, February 2005 vs. December 2005
  • Figure 5. Do You Have a Home Network?
  • Figure 6. Have You Downloaded Music from the Internet?
  • Figure 7. Respondents Who Have Paid for Downloaded Music, February 2005 vs. December 2005
  • Figure 8. What Music Service Have You Used Most Often to Purchase Music in the Last 12 Months?
  • Figure 9. Ease of Setting Up Account
  • Figure 10. Ease of Check Out
  • Figure 11. Ease of Finding What You Wanted on the Site
  • Figure 12. What Types of Music Did You Purchase Online?
  • Figure 13. Approximately How Much Did You Spend on Online Music in the Past 12 Months?
  • Figure 14. What Type of Products Are you Interested in Finding in an Online Store?
  • Figure 15. When You Shop for Music Online, Which of the Following Best Illustrates Your Typical Behavior?
  • Figure 16. Which of the Following is of Most Interest to You in an Online Music Store?
  • Figure 17. Which, if Any, of the Following Do You Do with the Music After Downloading It?
  • Figure 18. Which, if Any, of the Following Devices Do You Own?
  • Figure 19. Is this MP3 Player the First One You've Owned?
  • Figure 20. What Type of MP3 Player(s) Do You Own?
  • Figure 21. Are You Planning to Buy an MP3 Player in the Next 12 Months?
  • Figure 22. What Type of Player Are You Most Likely to Buy?
  • Figure 23. Would You Prefer to Listen to Your Digital Music on Your Mobile Phone or an MP3 Player?
  • Figure 24. Worldwide Revenue for Full-Length Tracks Downloaded to Mobile Phones (Units in Millions)