Study: Net music market will shift to subscriptions

Burgeoning sales of online music will be led by an industry shift to charge subscription fees, according to a study released today.

Rick Dube Webnoize analyst   Discussing an existing subscription model.

The Jupiter Communications study indicates that online music sales in the United States are expected to reach $5.4 billion in 2005.

The study found that while individual downloads will continue to be effective marketing tools and will entice people to make purchases, the majority of online music sales will come from subscriptions.

Jupiter projects that the online music sector will secure approximately one-fourth of the total U.S. music market in five years. The growth of music-sharing services such as Napster reveals that consumers are ready for online subscriptions, which will account for $980 million in sales in 2005 compared with an increase of individual music downloads to $531 million in the same year.

One of the challenges for subscription services will be to convince people who use services such as Napster and Gnutella to adopt a new model. The deciding factor will be features consumers often request, such as guaranteed file quality and virus protection, the study said. Consumers identified these features over content offerings such as artist chats as the most compelling reasons they would pay for music subscription services.

A study released last month by market research firm CyberDialogue also showed that nearly 11 million online music fans would have an "interest" in paying a monthly subscription fee to download their favorite tunes.

Jupiter's study also found that to prevent market erosion by Web music consumption, record labels must "actively" license their catalogs to third-party online music providers and be prepared to jointly market the resulting services.

EMI Recorded Music recently made 100 albums and 40 singles available for download from online retail sites. Works from Janet Jackson, Pink Floyd, Frank Sinatra, the Spice Girls and Tina Turner are included in the offering. Other giants in the recording industry, including BMG Entertainment and Sony Music Group, also have announced intentions to provide digital music downloads.