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Online Music Service 2006 Outlook

Point Topic reports that 2005 was a big year for the online delivery of music. By October 2005, Apple�s iTunes service had sold 600 million tracks worldwide, and Apple had shipped over 30 million iPod music players by the end of the year. International music industry body the IFPI estimated that downloads accounted for around 6 percent of total music sales in the first half of 2005.

However, although music sites do not have the overheads of a physical music retailer, there are significant running costs involved. There are catalogues to build, involving complex negotiations with rights holders, often repeated for individual countries. And there are value-added features to create, such as band interviews, playlists or talkboards. This all takes investment.

So with these low margins, what does 2006 hold for the online music industry? In an area with such rapid growth, it is risky to make predictions. But 2005 showed that online music is a service that people want and will pay for, so the overall outlook is very positive. Even so, some consolidation of sites seems likely, reducing the current high number of online music providers.

Other possibilities might include a change in pricing structure, away from one price fits all, towards price segmentation -- lower pricing for some artists and higher pricing for premium artists or obscure hard-to-find content.

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