Digital Music 2004

Bob Tedeschi looks at the digital music prospects for the coming year:

COMING to a music download store in 2004: Yo-Yo Ma’s Shostakovich Quartet No. 15 and Bob Dylan’s second show at Amsterdam.

So go the predictions of some music industry executives, who say that as music labels and retailers compete more aggressively online, they will offer more obscure titles and recordings of live performances that could find a paying audience through downloads but make no financial sense to distribute on CD’s.

This is but one of a handful of trends likely to emerge next year in the paid digital download arena, industry executives said. With hundreds of millions of investment and marketing dollars flowing into the sector, it could be the most active online commerce category. And with the activity comes a risk that it could resemble the Internet bubble of 1999, though on a smaller scale.

The first area of resemblance, analysts and executives predict, will be in the sheer number of online music stores that sell downloads, which will continue to build through the early part of next year, only to contract beneath the weight of excessive marketing spending and slim profit margins.

….In addition to Apple’s iTunes, RealNetworks’ Rhapsody, Napster of Roxio, MusicMatch, BuyMusic.com, BestBuy and others, online music stores from several other companies are expected to start in the coming weeks and months. JupiterMedia, a technology research firm, predicts digital music downloads will be a $1.1 billion marketplace next year and $3.2 billion in 2008. According to Nielsen SoundScan, the biggest paid download sites sold $3.2 million worth of individual tracks in October alone, more than double the number sold in July.

….Sean Ryan, vice president for music services at RealNetworks, expects the services next year to include some form of subscription download service. Such an offering, he said, would combine the flexibility of the so-called streaming services – where users listen to unlimited numbers of songs on demand, but cannot download them – and the portability of downloaded tracks.

“The idea is that consumers can download as many songs as they want,” Mr. Ryan said, “and move them from one device to others, but at the end of 30 days, if you don’t pay the subscription fee, the songs go away.

While the technology exists to offer such a service, Mr. Ryan said there were a number of issues to work out, including how much to charge. “But I think we’ll see such a service by the end of next year.”

“And that’s where this gets interesting,” he added. “You’ve got a portable music player that can fit 10,000 songs on it? Come on. No one will spend $1 a track filling it.” [NY Times]

I would nod sagely and add, “No shit.”

But portable players, he said, “become totally useful” when it is possible to rent an unlimited number of tracks for a flat fee. Mr. Ryan and other executives said consumers would also enjoy a greater range of tracks next year, as the download sites expand beyond pop music, and as artists migrate toward a growing revenue opportunity. Classical and jazz tracks will begin to proliferate, and Mr. Ryan said, live, archived performances from popular musicians will see new life online.

….Music owners will also have more flexibility in what to do with the tracks they download, said John Rose, executive vice president of EMI.

“Two or three years out, I’ll be able to send you an album that you can listen to once or twice, but that will expire after a certain amount of time if you don’t buy it,” Mr. Rose said. “The technologies are all starting to percolate. We’ll start to see much more of that come to market in the next year.”

Intriguing, no?