Tune-up time for biz

Study: Downloads, phones to pump music

Digitally distributed music will represent nearly 40% of all music sales in the U.S. within five years, according to a report from PricewaterhouseCoopers.

“The Global Entertainment and Media Outlook for 2005-2009” predicts that consumer spending on digital downloads will hit $3.6 billion in 2009, and music delivered to mobile phones will generate sales of $3.4 billion.

Digital downloads will number 2.1 billion in 2009, up from 140 million last year.

Collectively, digitally delivered and mobile will rep more than 37% of all music sold.

Report, being released today, paints a rather bullish picture for the entertainment industry overall, predicting a 7.3% global boost for all sectors over the next five years. Study contains analyses and forecasts of 14 major industry segments across five regions of the globe plus a global overview.

“Music was impacted first and the hardest by technology and piracy, and after four years of difficult times, it is poised for growth,” said Peter Winkler, managing director of global marketing, for PricewaterhouseCoopers Entertainment and Media practice. “It has gone from being the weakest to among the top five in positives.”

Mobile music will be the driver behind the music industry. Spending was $320 million last year on ringtones and the like; with the arrival of master ringtones and ringbacks, PWC projects the average mobile phone subscriber will spend $65 annually on music for the phone in ’09, reaching $3.4 billion.

Growth industry

Globally, PWC predicts an average annual rise in music sales of 8.3% between 2004 and 2009 to $56.3 billion. Last year’s global spend was $37.8 billion.

In the U.S., consumer spending on music will hit $18.8 billion in 2009, an 8% rise from 2005. Last year was the first time in four years that music sales rose from the previous year. Near the midpoint of 2005, music sales are down 8% from 2004, according to Nielsen SoundScan. Physical sales of CDs are expected to be flat or down, with DVDs of musicvideos propping up numbers of physical sales.

Winkler said without the infusion of the mobile music biz, music would be rising only about 2.5%.

Report predicts videogames and television shows will be key places to launch new artists and songs; labels will develop pricing strategies to keep consumers in stores; and sales of physical CDs will dip below $12 billion. Report suggests that the average price of a CD — $14.85 in ’04 — will drop to $13.50 in ’09. DVDs will drop as well, from last year’s $18.39 to $15 in 2009.

The world’s largest territory — Europe/Middle East/Africa — will remain No. 1, accounting for $20 billion in 2009. Asia will be the fastest growing, rising 10.6% to $14.7 billion.

Mobile music sales will surpass physical sales in Asia in 2008 and Latin America a year later. Report noted that the number of phones capable of delivering music will grow considerably. Motorola, which was singled out, will have music capabilities on one-third of its phones by the end of the year. Nokia is expected to offer a music subscription this year.

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