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Analysts with Merrill Lynch are reporting that 2001 may prove to be the worst year in the history of the global recorded music business.
MUSIC BIZ RIDE MAY GET BUMPIER
Fasten Your Seatbelts, Kiddies:
Forecasters Predict Turbulence Ahead
We regret that what we're about to report may have the undesirable effect of bumming certain people's highs. Given that it's been such a great year, what with the world at peace, the economy booming and that whole "online revolution" thingie working out just like everyone thought it would, it's a real shame to have to get all negative and everything.

But certain Wall Street soothsayers are predicting that—get this—things are going to get worse before they get better.

Indeed, analysts with Merrill Lynch are reporting that 2001 may prove to be the worst year in the history of the global recorded music business, with a 10% or greater decline in dollar terms owing to continued piracy problems, the aftermath of Sept. 11 and trouble in Latin America. Their forecasts predict that the business will continue to be down again in 2002, declining by a little more than 3%.

However, while the economic downturn at large combined with the continuing serious challenges to the industry posed by online piracy are poised to make things a royal pain in the keester for the time being, those same soothsayers are saying it could all shake out to a modest 6.5% growth rate from 2005-2010, based on an assessment of the future which, while not altogether rosy, offers some hope.

That hope, however is based largely on the assumption that a workable online security scheme can be implemented. ML analysts figure that the music market has a shot at growing again through the expansion of online and mobile services, as well as new audio formats such as Super Audio CD and DVD Audio, but they caution that the threat from decentralized, or "serverless" peer-to-peer file sharing software must be addressed through a standardized digital-rights-management system.(Does anybody remember SDMI?)

Interestingly, the analysts also point out that the once seemingly unlimited supply of long-distance carrier capacity now looks a lot more limited, as investment in new carriers has slowed, and the increase in streaming has sopped up a lot of the surplus bandwidth. Once demand once again exceeds supply, the theory goes, ISPs may revert to a pay-per-volume or usage payment scheme (rather than the currently prevailing flat rates), thus eliminating "free" downloading.

That said—and we're really not sure what it means—it still looks like it's going to be a long, cold winter. Buckle up your overcoat, honey.

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