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JupiterResearch US Digital Music Forecast January 8, 2007

Posted by David Card in Media.

We’ve posted our latest music forecast. Highlights:

– In the US, digital music downloads (e.g., iTunes Music Store, etc.) grew over 30 percent in 2006, to over $800 million. On-demand subscription services, like Rhapsody and Napster grew 14 percent, to over $185 million.

– US digital music spending will reach $2.5 billion in 2011. Music download spending will more than double to $1.7 billion in 2011, growing at a 16 percent CAGR. Our download forecast is conservative, and we’ll be watching that closely, but surveys and supply-side info confirm our assumptions so far. The smaller segment, music subscription services, will reach $745 million in 2011 via a 32 percent five-year CAGR.

– Digital sales will not compensate for lost CD sales in the five-year horizon, nor will they return the overall industry to growth. But digital music and ring tones are where the growth is. Digital music sales will total 22 percent of US consumer music spending in 2011, and ring tones another 12 percent.

We’re seeing some strong hints of digital substitution finally appearing among early digital music users. Still, the music downloads business will remain a sampling medium for many users rather than a CD replacement. And for the next several years, on-demand subscription services will appeal primarily to niche audiences among music aficionados.

Here’s the report; here’s the press release. Clients, I’ll be hosting a teleconference on the subject next week.

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