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Music Sales Shift from Downloads to Streams


The U.S. recorded music industry has been challenged. Traditional media companies were slow to embrace the online distribution of digital music. They ignored consumer needs, until CD sales went into a rapid decline -- due partly to P2P file sharing activity.

Having moved beyond their prior denial, regarding the shift in market demand, big-media record labels are still attempting to recover from their self-inflicted downturns in revenue and profit.

eMarketer forecasts that U.S. consumer spending on digital music will increase at a compound annual growth rate (CAGR) of 11.04 percent in the next four years, reaching $4.56 billion in 2013, up from $3 billion in 2009.

All of this new growth will come from the online segment -- which comprises track downloads, full album downloads, music videos, digital kiosks and subscription services.

"eMarketer expects the tipping point between physical and digital formats to occur sometime in 2010," said Paul Verna, senior analyst and author of their new report.

Paid music services are starting to shift their focus away from selling downloads and instead concentrate on granting users paid subscription access to content -- including the music libraries they already own.

Apple, far and away the market leader in the digital music distribution industry, has seen its iTunes ecosystem slow in growth, while cloud-based initiatives gather momentum.

The idea behind a cloud-based music service is to allow users to store collections on remote servers and access the content on all connected devices -- computers, smartphones, netbooks, tablets, e-readers and game consoles.

"While the first generation of U.S. digital music services was predominantly download-based, the next iteration is likely to be based around subscription models," said Mr. Verna.

U.S. consumers are growing accustomed to accessing digital content on remote servers via Web browsers. Extending this paradigm to music files is a logical step, and one that content owners are determined to make work.

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