Silicon Still Rocks the House

The Internet may have forever changed the music business, but online downloads will keep playing second fiddle to compact discs for at least the next five years.

That conclusion comes courtesy of a study of the European music market by Jupiter Research, but the findings could echo throughout the United States as companies like Apple, Napster and Microsoft play musical chairs in the pay-for-play download space. "Digital music distribution will be an important alternative revenue channel for the music industry, but it is not about to replace the CD," said Jupiter analyst Mark Mulligan as quoted by Reuters.

More from the wire: "Technology consultancy Jupiter Research said in its annual report that in 2009 European music fans will buy 836 million euros ($1 billion) worth of music in the form of digital downloads and subscriptions to Internet radio services. At that level, digital music revenues will account for roughly 8 percent of Europe's estimated 10.2 billion euro music market." Also noted, courtesy of Reuters: "The study does not take into account the surprisingly successful market for mobile phone ring tones. The piracy-battered music industry is desperate to see industry-backed download services become a hit with consumers to derail the popularity of free file-sharing networks such as Kazaa and eDonkey."

Digital music players, including Apple's popular iPod player, are the biggest factor spurring growth, the article said. The Jupiter study also found that not surprisingly the United Kingdom will be the No. 1 online music market in Europe by the end of the decade, BBC News Online reported.

Reuters noted that Jupiter's numbers are more conservative than a report on digital music last month by Forrester Research, which said the European music market would be worth $4.3 billion by 2009. "Although Europe's digital music market has finally begun to take off after a sluggish start, it will remain a relatively niche market," said Mark Mulligan, a Jupiter analyst, according to Reuters.

Reuters reported on the Forrester study last month: "The paid-for music downloading market in Western Europe has been languishing behind the United States -- until now. The market will finally take off in 2004. Britain, France, and Germany will control the bulk of the market. Over 60 percent of legal downloads in Europe will be sold in these three countries in 2009. Southern Europe's Spain and Italy will grow strongly to account for around 20 percent of the market by 2009."
• Reuters via washingtonpost.com: CDs To Dominate For Years Over Net Downloads-Study (Registration required)
• Reuters: Music Sales On the Web To Hit Jackpot (Article from Aug. 31)
• BBC News Online: CDs 'Will Dominate Music Market'

Jupiter also released a report last year on Europe's online music market that offers an interesting contrast and suggests that the online music business has evolved steadily over the last year. According to the survey, "the European online music market has made little progress, with 43% of consumers surveyed still not convinced of the need to pay for a digital music service." It also noted that "2002 was a year of missed opportunity as the music industry failed to grant the types of licenses to legitimate online music services that would have empowered them to compete with illegal file sharing. However, to date, 2003 has been a year of progress and Jupiter Research expects this to continue through the remainder of the year."

As the pay-for-play music space gets its sea legs across the ponds, the music industry continues to battle digital piracy, including illegal downloads of music. Congress continues to be on the side of the recording industry, which has slapped consumers swapping copyrighted songs for free with lawsuits. Now lawmakers in the Senate "could take action this week on a bill that would make it easier to sue 'peer-to-peer' networks like Kazaa and LimeWire that allow users to copy music and movies over the Internet," Reuters reported. "The bill would give a boost to recording companies and movie studios, which so far have been unable to shut down the online file-trading networks in court. But it must overcome fierce opposition from copyright activists and technology companies, which worry that makers of iPods and photocopiers could be held liable as well."
• Reuters via the New York Times: U.S. Senate To Weigh Bill Targeting Web Song Swaps (Registration required)

Wired News reported on the bill, also known as the Induce (Inducing Infringement of Copyrights Act), which isn't making friends with P2P groups or consumer advocates. "CD burners, jukebox programs and Wi-Fi routers are just a few of the technologies that could be threatened under a new version of the Induce Act, critics say. Like the first version of the controversial bill -- which is championed by the music and movie industries -- the latest language says that a company that intentionally induces a person to infringe copyright is liable," Wired reported. "The latest version was circulated by Senate Judiciary Committee staff Friday. It is scheduled for markup at a meeting of the Judiciary Committee on Thursday." Jason Schultz, an attorney with the Electronic Frontier Foundation, told Wired: "Any technology that allows dissemination is still completely threatened by this bill. Even if you have nothing in your business model that has anything to do with infringement, you can still be held liable for all of your users who do infringe."
• Wired News: New Induce Act Alarms Foes

Even while the legalities of file sharing are hashed out on the Hill, the technology that powers file sharing on the Net continues to get better. The San Jose Mercury News today reported on the development of faster file-swapping software, which surely will become a new nemesis for Hollywood. "A radical new technology threatens to do to Hollywood what Napster did to the music industry. It's called BitTorrent and is much faster than other file-swapping software used to exchange movies and music over the Internet. In fact, BitTorrent can transfer a feature-length film in about two hours -- a fraction of the 12 hours it typically takes with file-sharing services like Kazaa. What's more, the speed of the download actually increases with the number of people sharing a particular file. ... As BitTorrent becomes mainstream, it imperils the movie studios' most lucrative source of revenue -- the $17.5 billion the industry reaped last year from DVD sales and rentals," the newspaper reported.
• San Jose Mercury News: File-Swap Software Gets A Speedy Update (Registration required)