Mark Mulligan[Posted by Mark Mulligan]

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Today Forrester announced its latest European Music Forecasts. As part of these we have, for the first time, forecasted digital
licensing revenues. In short we’ve put
numbers to the ever growing talk about next-generation services. The reason we decided to build these new
licensing forecasts alongside updating our music sales forecasts is to quantify
just how much revenue opportunity exists beyond the hype.


In many respects these are
tough times for the music industry:

  • revenue from CD sales continues to plummet
  • online music piracy continues to thrive (despite concerted industry action)
  • the online music business (largely defined by Apple’s iTunes Music Store) has failed to break out of a niche
  • mobile music sales have been a disappointment –
    and that’s putting it tactfully.


So traditional sales are
falling and the digital sales future isn’t exactly so bright that anyone needs to wear shades. And
yet, there is plenty for the industry to be positive about, indeed the foundations
for a vibrant future are already in place.  More people are listening to more music across
more platforms and devices than ever before.  They’re just not buying as much of it as they
used to.  What comes next is building a
series of new music businesses models that monetize consumption.  As my colleague James McQuivey would put it: the
music industry is moving away from the distribution paradigm to the consumption


That doesn’t mean that recorded
music sales are dead, far from it, they’ll still dominate overall revenues.  (In fact the CD will still be the largest
single revenue stream 6 years from now.)  Rather, that monetizing consumption will be
key to future revenue growth on top of a modest recorded music recovery in
2011. Digital licensing revenue from the
likes of Nokia’s Comes With Music and MySpace music present the opportunity to
drive revenue when consumers aren’t directly paying for the music they listen

By 2014 Forrester forecasts that there will the European social music audience will total 78 million individuals and that total digital music licensing revenue will be worth over one billion euros.  This is serious money, but making music free or appear to be
free isn’t exactly the music industry’s first choice: it’s the strategic consequence
of recognizing that the only way to fight free is with free itself.  Most of the end users of the licensed
offerings wouldn’t otherwise spend any money on music.  Or at least that’s that theory. All value chain members will need to
carefully position and manage these services to ensure they don’t cannibalize music


So, although these are tough times
for record labels they are also a period of opportunity for companies as diverse as mobile
handset manufacturers, broadband ISPs and brands.  The music industry is embarking on Digital Music
2.0 but  the boundaries of exactly what this
is and means are still up for grabs.  Companies
with innovative services will find no better time to seek licenses and to help
the music industry find answers.  There
won’t be one killer app. One size does
not fit all for digital music.  That
means multiple layers of opportunity for diverse vendors. In the report we look at some of these and
provide recommendations and advice across the value chain. The report,
available to Forrester clients, also includes:


  • Music spending forecasts (split by online,  mobile OTA, ring tones, CD)
  • Music consumer forecast (split by music buyers, social music consumers and subsidized music consumers)
  • Digital music licensing (split by social music and subsidized music)



If you are press and would like
more information please email PRESS AT FORRESTER DOT COM