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"As a sampling medium, file sharing appears to increase consumer exposure to music, while downloads offer a new alternative for storing, transferring and listening to music."
—Michael Norkus, Emerald Solutions

STUDY HAUL

Three Reports Find Big Upside To Online Music
Separate studies released today by NARM, Magex and JP Morgan all draw the same conclusion: digital music is a growth industry.

While acknowledging the disruptive effect digital distribution will have on the music business in the short term, NARM's study projects "significant growth opportunities," especially for larger entities, but only "if companies can leverage their traditional strengths and create compelling consumer value propositions." The study, "Creating Industry Value From Digital Music Distribution," was conducted by Emerald Solutions, with the focus on file sharing, downloading and streaming.

"As a sampling medium, file sharing appears to increase consumer exposure to music, while downloads offer a new alternative for storing, transferring and listening to music," Emerald Solutions' Michael Norkus explained. "But we view streaming as presenting the greatest concern for industry incumbents because it provides a new opportunity for consumers to listen-on-demand without the constraints of physical ownership."

According to NARM President Pamela Horovitz: "The retail entertainment industry is currently facing one of the most significant challenges in its history. The Internet presents artists, labels, wholesalers, and retailers with both significant challenges to industry structure as well as tremendous opportunities to innovate product formats, create a powerful new marketing and distribution engine, and build more personalized relationships with consumers."

Magex, meanwhile, says that the great majority of respondents to its online-consumer study expect to pay for music online. The netco reports that 78% of respondents to its online-music consumer study "believe that free music downloads will be regulated at some time in the future." The study goes on to reveal some intriguing figures: that consumers expect to shell out 83 cents per sample, $3.05 per single and $12.89 for a monthly subscription. Not only that, but they expect these rates to be in place in a year and a half.

"The results of the survey are quite revealing," said Magex CEO Patrick Campbell, self-servingly. "It proves that the attention being paid to such issues as standardization in technology, pricing and content availability—all impediments to the adoption of downloads—the leading concern from consumers is still payment security. Our number one goal is to build trust in d-commerce and safeguard users against payment fraud."

Finally, the JP Morgan study forecasts an expansion of the global online music biz from $38 billion to $65 billion by 2010, with downloads by that time accounting for 19% of the total, online physical sales 26% and traditional sales 55%. According to the study, offline physical sales will peak by 2004-2005, after which downloads will start to close the gap.

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