Net Could Make Music CDs Passe: Study

With almost half the 12-22 year olds surveyed downloading music last month, half of those saying they buy less CDs, and online file swapping cutting $700 million from music sales, respected marketing research analysts Forrester Research says it's possible that music CDs could become the 21st Century's version of wax and vinyl records: collectibles sooner than people expected.

The company's latest study on the issue says rising on-demand media services "will overtake piracy," while 33 percent of all music sales will come from online downloading, especially with an estimated ten new Windows-based music services expected to emerge as serious entries within the next nine months. And CD sales, Forrester says, would be 30 percent less in five years than they were in 1999, while "various forms of video-on-demand" wold hit $4.2 billion gross.

"The shift from physical media will halt the music industry's slide and create new revenues for movie companies, but it will wreak havoc with retailers like Tower Records and Blockbuster," said Josh Bernoff, Forrester principal analyst, in the study. "As a result, we're about to see a massive power shift in the entertainment industry."

It won't come without various hiccups, however. Forrester's study also says that, for all the controversy it has provoked, the Recording Industry Association of America's subpoena campaign against online peer-to-peer music file swappers has had some definite effects. Over two out of three younger Netizens surveyed said they'd stop file swapping if they thought they were risking fines or jail time.

Forrester says America Online has 90,000 MusicNet subscribers, while Musicmatch and RealOne Rhapsody expect to differentiate their media players with Web radio, BuyMusic will develop "personalized recommendations" from ChoiceStream, and Apple is preparing to issue a Windows version of its hit iTunes Music Store.

The research company also says Apple and Musicmatch are likely to come up as the online music leaders by 2004's end, while file swapping will dip and on-demand and download subscription could mean $270 million in revenues for the year.