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Online Music Distribution to Dwarf Mobile

Yankee Group today announced at the 2008 International CES that two fundamental shifts are driving the music industry—digitization and direct-to-consumer transactions. As a result, US recording industry revenue has plummeted 25% since peaking at $14.6 billion in1999. By year-end 2006, it had declined to $11 billion.

Despite the best efforts of mobile operators, online distribution will continue to dominate the digital music market, accounting for 80 percent of industry revenue by 2012, according to a new report released by market research firm Yankee Group.

According to "U.S. Digital Music Forecast: What Fate Awaits the Record Labels?," digital revenue (online and mobile) is accelerating, growing to $1.98 billion by the end of 2007 -- while Yankee forecasts the digital music market will grow to $5.34 billion by 2012, the leap will remain insufficient to offset declining CD sales, although the increasing marginalization of labels guarantees a larger share of revenues will go directly to artists.

Yankee Group anticipates online music will grow faster than mobile music downloads, and online single downloads will outstrip album downloads or subscriptions -- even though the addressable market for music-enabled phones will expand to 266 million by 2012, only 9 percent of mobile subscribers will actively use them as portable music players. Accordingly, Yankee recommends that carriers actively promote the PC distribution channel over the handset.

"No industry has felt the impact of the Anywhere Consumer more strongly than the recording industry," said Michael Goodman, director of digital entertainment at Yankee Group. "It's not just that the record labels are facing declining revenue; rather, the basic relationship between recording artists, record labels and consumers is in major flux. As bands retain ownership of their music, the record label's role shrinks while the role of technology vendors and online music stores grow." [FierceMobileContent]

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