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SUMMARY
In 2004, online music in the U.S. represents nearly a $1 billion business. Music purchased online, including CDs and vinyl, music downloads, and streaming audio subscriptions are expected to reach $963 million in 2004. Alongside the rise of digital cable television (on-demand programming), home theater systems, digital video recorders, and CD/DVD burners, the online music scene is rapidly evolving in terms of widespread consumer adoption. As of spring 2004, an estimated 40% of Internet users (45 million American adults) paid for some form of online music in the past 30 days. The gamut of online music purchasing includes subscriptions to streaming audio services, music downloads such as iTunes, and physical media (CDs, vinyl) purchased online. On average, an estimated 67 million people in the U.S. visit a music-related website each month. Whether the object is physical music purchases, streaming audio, or music downloads, Americans are increasingly looking online for music. This report covers the online music market, with the persistent thread covering one key theme: consumers want to pay for music online, but only if it is convenient to do so. For the purposes of this report, the following definition is used: The Mintel online music market report includes sales of physical music products, such as compact discs, cassettes, and vinyl records purchased via the Internet in the U.S. Also are music downloads and subscriptions to digital music, commonly referred to as streaming media or streaming audio. The primary concentration of this report, however, is on music downloads, which represents the hyper-growth segment of the industry. The free, peer-to-peer based networks such as Kazaa and WinMX are referenced extensively throughout this report as they have impacted the online music business. This report does not include sales of blank media, software, hardware, portable audio players (such as Rio or iPod), or other devices used for music playback or recording. Also excluded are music video sales, such as DVDs, streaming video, or VHS music. However, these products, services, and media types are referenced in this report to the extent that they affect the online music business. TABLE OF CONTENTS
INTRODUCTION AND ABBREVIATIONS- Introduction
- Other relevant reports
- Definition 2
- Abbreviations & terms
EXECUTIVE SUMMARY- Fee versus free
- Physical media, streaming audio, and a variety of digital file formats
- A digital audio primer
- A web of online music distribution choices
- Future of streaming and digital downloads holds promise
- Consumers want music online
- A wide variety of advertising vehicles
- Meteoric sales growth through 2009
MARKET DRIVERS- PC penetration, broadband, and the spread of technology
- Figure 1: Top U.S. broadband internet service providers, July 2004
- Online music services pre-installed on new computers
- Lack of file standards strain industry
- Preferences among demographics, privileged youth
- Figure 2: Total U.S. teen spending, at current and constant prices, 1999-2004
- Figure 3: U.S. population projections, 2000-2009
- Fee-based music services prove cost effective
- Figure 4: Digital audio download services
- iPod and integrated MP3 players
- Figure 5: Integrated MP3 players with non-PAP products
- The RIAA's ongoing struggle with music piracy
- Convenience factors move buyers online
MARKET SIZE & TRENDS- Figure 6: Total U.S. sales of music online, at current and constant prices, 1999-2004
- Graph 1: Total U.S. sales of music online, at current and constant prices, 1999-2004
- Top ranking music brands on the Internet
- Figure 7: Top U.S. internet music brands, May 2004
- Lawsuits persist, yet P2P still among the most popular online music brands
MARKET SEGMENTATION- Introduction
- Figure 8: Sales of music online, segmented by type, 2002 & 2004
- Physical music products
- Figure 9: E-commerce sales and total retail sales, 1999 through 2004
- Music downloads
- Figure 10: Selected U.S. online music download services, summer 2004
- Apple iTunes launch
- Streaming audio
- Figure 11: Top U.S. media players, July 2003
ADVERTISING & PROMOTION- Introduction
- Starter kits, prepaid music download cards
- AOL direct mail pieces push free music downloads
- Free downloads from Musicmatch with large Slurpee purchase
- McDonald's, Starbucks, Heineken, Coca-Cola join the online music trend
- Coke versus Pepsi in the online music space
- E-mail marketing, e-newsletters, pop-ups, and banner advertising
- Word of mouse, giveaways as a primary marketing tool
ONLINE DISTRIBUTION- Introduction
- Figure 12: U.S. sales of online music, by company, 2002 & 2004
- RealNetworks versus Apple takes center stage
- Figure 13: Online music services and compatibility factors, summer 2004
- Apple iTunes
- AOL MusicNet
- Musicmatch, Inc.
- RealNetworks Rhapsody (Listen.com)
- Other online music distributors
- U.S. government regulators step into the fray
THE CONSUMER- Introduction
- Consumer online activities, music related and other
- Figure 14: Prevalence of music related and other online activities in past 30 days, by gender, January-September 2003
- Figure 15: Prevalence of music related and other online activities in past 30 days, by age, January-September 2003
- Figure 16: Prevalence of music-related and other online activities in past 30 days, by income, January-September 2003
- Figure 17: Prevalence of music-related and other online activities in past 30 days, by level of educational attainment, January-September 2003
- Attitudes to online music buying and downloading
- Figure 18: Attitudes to online music buying and downloading, July 2004
- Figure 19: Attitudes to online music buying and downloading, by gender, July 2004
- Figure 20: Attitudes to online music buying and downloading, by age, July 2004
- Figure 21: Attitudes to online music buying and downloading, by household income, July 2004
- Figure 22: Attitudes to online music buying and downloading, by presence of children, July 2004
- Figure 23: Attitudes to online music buying and downloading, by level of educational attainment, July 2004
- Key factors for buying CDs online
- Figure 24: Importance of key factors for buying CDs online, July 2004
- Figure 25: Importance of key factors for buying CDs online, by gender, July 2004
- Figure 26: Importance of key factors for buying CDs online, by age, July 2004
- Figure 27: Importance of key factors for buying CDs online, by household income, July 2004
- Figure 28: Importance of key factors for buying CDs online, by level of educational attainment, July 2004
- Reasons why online music shoppers do not buy CDs online
- Figure 29: Reasons why music shoppers do not buy CDs online, July 2004
- Figure 30: Reasons why music shoppers do not buy CDs online, by gender, July 2004
- Figure 31: Reasons why music shoppers do not buy CDs online, by age, July 2004
- Figure 32: Reasons why music shoppers do not buy CDs online, by household income, July 2004
- Figure 33: Reasons why music shoppers do not buy CDs online, by level of educational attainment, July 2004
- Figure 34: Reasons why music shoppers do not buy CDs online, by race, July 2004
- Traditional music store shopping
- Figure 35: Importance of selected aspects of visiting a traditional music store, July 2004
- Figure 36: Importance of selected aspects of visiting a traditional music store, by gender, July 2004
- Figure 37: Importance of selected aspects of visiting a traditional music store, by age, July 2004
- Figure 38: Importance of selected aspects of visiting a traditional music store, by household income, July 2004
- Figure 39: Importance of selected aspects of visiting a traditional music store, by level of educational attainment, July 2004
- Conclusions
FUTURE & FORECASTFUTURE TRENDS- Broadband continues to ramp up high-speed connections
- Internet as a music promotion vehicle
- Figure 40: Top streaming video content categories, July 2003
- Jason Mraz: A case study
- More songs licensed for online sale
- Prepaid music download cards to make inroads in retail stores
- Custom-crafted song libraries, personalized streaming service
MARKET FORECAST- Overview
- Music online
- Figure 41: Forecast of total U.S. sales of music online, at current and constant prices, 2004-2009
- Graph 2: Trends in sales of online music at current prices, 1999-2009
- Online physical music
- Figure 42: Forecast of U.S. sales of online physical music, at current and constant prices, 2004-2009
- Online download music
- Figure 43: Forecast of U.S. sales of online download music, at current and constant prices, 2004-2009
- Online streaming music
- Figure 44: Forecast of U.S. sales of online streaming music, at current and constant prices, 2004-2009
- Forecast factors
APPENDIX: TRADE ASSOCIATIONSAPPENDIX: RESEARCH METHODOLOGY- Consumer Research
- Sampling & Weighting
- Presentation & Definition
- Further Analysis
- Trade Research
- Informal trade research
- Formal trade research
- Desk & Internet Research
- Sources
- Definitions
- Forecasts
APPENDIX: WHAT IS MINTEL?- Mintel Publications
- Mintel Services
- Product retrieval
- Retail audits
- Tailored research
- Global New Products Database
- Research Support/Consultancy/MIC
- The Mintel Information Centre (MiC)
- PR Research
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