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Forrester: 'End of Music Industry'

19 Feb, 2008 By: Erik Gruenwedel

The transition from music CDs to digital files should surpass 50% of all music sales by 2012, according to a new Forrester Research Inc. report.

The study, based on a survey of 5,000 consumers, said despite 50% of music sales going digital at a compound annual growth rate of 23%, to $4.8 billion, the increase will not be enough to offset declining CD sales.

“This is the end of the music industry as we know it,” said James McQuivey, principal analyst with Forrester.

The report says a combination of social network Web sites, DRM-free music and 57% capacity on most consumer MP3 players would result in digital music files becoming the mass market for the future of packaged music.

“Media executives eager to stay afloat in this receding tide must clear the path of discovery and purchase, but also hardware and software providers can ultimately make listening to music as easy as turning on the radio,” McQuivey said.

The analyst said ease of access to music does not necessarily translate into robust growth for online subscription services, which are projected to reach revenues of $459 million by 2012.

McQuivey said the music industry has to redefine what its product is. He said it has failed to capitalize on the growing popularity of video games, including Guitar Hero and Rock Band, whereby artists could sell millions versus thousands of CDs.

“Music executives have spent years tracking CD sales,” he said. “But the artist is the product — not just the source of it.”

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