Study: Products like the iPod spur digital music growth

Thanks to portable music players such as the iPod with 10GB and higher storage capacity, the digital audio market is entering a new era, according to the In-Stat/MDR research group.

The high-tech market research firm reports that with the availability of file swapping and new online subscription services and aforementioned portable players, consumers now have more choices than ever for how they enjoy their music. The result is that revenues derived from sales of online music (both physical media products and those that are downloaded) and digital music players will experience “exceptional growth rates,” In-Stat/MDR reports.

This is despite the current hoopla over the delivery of digital music. In fact, according to the research firm, online music revenues are expected to grow at a compound annual growth rate of 33.4 percent between 2001 and 2006 and portable digital music player unit shipments (including solid state and revolving media products) will grow from about 7.2 million in 2002 to almost 30 million in 2006.

“One of the significant factors affecting the portable digital audio player market is the increasing variety of players available,” said Cindy Wolf, an analyst with In-Stat/MDR. “The success of Apple’s iPod has led many manufacturers to enter the hard drive-based segment of this market.”

Revolving media will also experience growth due to the inexpensive cost of blank CDs, the availability of networked products and the growing percentage of consumers with CD burners, she said. But it’s not all smooth sailing. According to In-Stat/MRD, the digital audio industry still has plenty of hurdles to overcome. Subscription services and anti-piracy technologies will need to address issues from a consumer, manufacturer and record label perspective, and legal issues affecting the worldwide music industry will also have an effect on the industry, the report notes.

“Though the recording industry finally seems committed to establishing a viable online distribution model, the labels will be in a much better position to understand how to structure their services to entice customers in another 12 to 18 months,” Wolf said.

When comparing online music sales by segment, revenues from actual “physical media” music products will still account for the lion’s share of total online sales for some time to come. Revenues from downloading and streaming are expected to remain less than 10 percent of total revenues through the year 2004, according to In-Stat/MDR. And consumer interest seems to validate the concept of a home jukebox with an integrated hard drive, their report states.