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THE MORNING BUZZ: Is Online Delivery the Key to A Bigger Entertainment Pie?

18 Aug, 2002 By: Stephanie Prange

Yet another report came out Monday that indicates consumers who get entertainment online buy a lot of CDs and that record labels may be wrong in attacking online delivery of music for hurting business.

Weekly “streamies” – people who have watched or listened to streaming media online in a week – bought more than one and a half times the number of CDs in the past year than the average American, according to a new study by Arbitron Inc. and Edison Media Research. The study found weekly streamies bought 21 discs while the average American bought 13.

Last week, a report from Forrester Research found that piracy is not responsible for the 15 percent drop in music sales in the past two years. “There is no denying that times are tough for the music business, but not because of downloading. Based on surveys of 1,000 online consumers, we see no evidence of decreased CD buying among frequent digital music consumers," said Josh Bernoff, principal analyst at Forrester.

“The results were compelling and conclusive: Nearly every variety of online music activity was likely to correspond with increased purchasing by consumers, while the absence of such activities correlated with decreased purchasing,” wrote the lead analyst on the Jupiter study, Aram Sinnreich.

And that report echoed a similar study Jupiter Media Metrix released in May.

Our audio brethren, who are leading the way into online delivery (whether they like it or not), are quarreling with their best customers when they rage against online music. Research indicates online music may actually be stimulating the CD-buying public.

It's the “pie gets bigger” theory that seems to be working to some extent in the video market right now. While a whole new arena of sellthrough business has opened up with DVD, it hasn't yet resulted in a sharp dropoff in the rental business. The pie got bigger. We've seen it before with pay-per-view, which settled into its niche without destroying the packaged media business. And, if these recent reports are any indication, online delivery of movies will find its niche in a bigger pie as well.

As movie downloading makes its way onto the scene, the packaged movie industry needn't rail that it is consuming its business – there will likely be enough for everyone.

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