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"Losses to digital piracy will not cripple the industry because the pie is too big. But piracy has eroded the business, and it will continue to do so."
—Kevin Carton, Pricewaterhouse Coopers

REPORT SAYS NAPSTER
HURTS SALES

But Losses Due To Digital Piracy Won’t Cripple Industry Because "The Pie Is Too Big"
What exactly do numbers mean in the online world?

Documented proof of plummeting sales due to Napster and other services indicates that the music industry's fears of diminished returns are being realized. But ultimately, the benefits of the Internet and emerging digital technology will far outweigh piracy concerns.

That's the conclusion of a PricewaterhouseCoopers report that says sales at music stores nationally rose 12% in the first quarter this year compared with the same period last year, The Hollywood Reporter said. But the report adds that sales at record stores near college campuses—where Napster is most formidable—dropped 4%.

The Reporter said the report concludes, beyond the piracy issue, the Internet will offer new and inexpensive ways of distributing music and growing profit margins, and it will spark a growth spurt in the music singles category. Therefore, the Internet represents a short-term scary—but long-term positive—opportunity for the music industry.

The report, titled "Global Entertainment and Media Outlook: 2000-2004," went on sale for $2,250 a copy. The Hollywood Reporter obtained an advance copy of the chapter pertaining to the recorded music industry.

"Losses to digital piracy will not cripple the industry because the pie is too big," said Kevin Carton, global leader of the entertainment media practice at PricewaterhouseCoopers. "But piracy has eroded the business, and it will continue to do so."

The report says that the U.S. music industry will grow from $14.59 billion in 1999 to $18.44 billion by 2004, or 4.8% annually. Legitimate music downloads of albums and singles, though, will grow much faster, from $16 million this year to $1.5 billion in 2004, when digital downloads will represent 8.2% of all music sales.

The report predicts that albums will be downloaded from the Internet for $7.50 apiece in 2004, and singles will cost about $2.50. Singles, in fact, will enjoy a renaissance of sorts, growing from 3 million online sales this year to 80 million in 2004, constituting 45% of the singles market.

HITS' editorial staff wishes it had Hollywood Reporter juice so they could have gotten the report day-in-date.

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