Entertainment travels through the wire -- and discs go away

When it comes to piracy of music and movies, discussions about the future quickly devolve into shouting matches. There's just too much heat and too little light here -- the perfect spot for us to wade in. In a just-published report, "From Discs To Downloads," we look at real data from real consumers and determine that videotapes, CDs, and even DVDs will go the way of the LP -- replaced this time not by another media format but by entertainment delivered through a wire.

First, some sobering data. Half of young people (those aged 12 to 25) download music, and one in five of those downloaders has downloaded a feature film, too. Add in the 10% of older consumers who download, and you've got a clear threat to packaged media. Nearly three-quarters of downloaders believe that people should be able to download music for free, and half buy fewer CDs because they download. This data makes it possible to create the first estimate of losses to the music industry from file-sharing: $700 million a year.

Lawsuits will stem the tide of this threat -- 68% of young consumers told us that the threat of prosecution would stop them from downloading. But that's not enough. Media companies need to act aggressively to launch new services. We count 10 different services set to launch in the next year for music downloads. Faced with their own growing threat (see the figure), movie executives are scrambling to deliver movies on-demand via cable and the Internet.

So what will happen when the dust clears? Piracy will beget paid on-demand media services, which in turn will transform the way entertainment gets delivered. CD sales will keep falling, replaced by downloads. Movie rentals and then sales will come down a wire. So don't get too attached to those shiny plastic discs -- they're on the way out. (Won't you miss the 5-minute wrestling match every time you try to open a new CD?) This is great news if you happen to be in a position to deliver those experiences to consumers -- think Yahoo! or Comcast. But for Tower Records or Blockbuster, the writing's on the wall.

I'm looking forward to seeing many of you at our Consumer Forum in New York City on September 21 to 23. We have a great topic -- building the next-generation multichannel experience -- some fantastic speakers (led by Barry Diller), three tracks (so there's something for everyone), and an expected crowd of 500 people. If you have a minute, come down to the podium to say hello.

Have a great September!


Chris Charron
Devices, Media & Marketing Group Director

P.S. If you'd like to suggest research for us to write, or if there are data points you are looking to track down, feel free to drop me a line anytime at chrischarron@forrester.com.

Research Referenced In This Issue If you printed this email, get links to the research featured in this week's issue by going to www.forrester.com/go and entering the five-digit number of the report you'd like to read. Can Young File Sharers Be Stopped? Yes! (17183) From Discs To Downloads (16076) Owning The Telecom Consumer (16729) RIP: The Online Consumer, 1998 To 2003 (17225) The Internet's Big Impact On Media, 1998 To 2003 (32268) The Web Attracts The Top Mobile Customers (32371) Why Consumers Buy Technology: It's A Family Affair (32314) Will Ad-Skipping Kill Television? (15459)

EMAIL: Email this issue to a colleague.

PRINT: View a printer-friendly version of this issue.

VIEW ARCHIVE: View past issues of First Look.

TECHNICAL SUPPORT: Call the Client Resource Center
1 866/FORRESTER (1 866/367-7378) or +1 617/613-5730

UNSUBSCRIBE: We hope you like First Look. But if you want to unsubscribe, please go to our email subscriptions page.