While physical music sales in Europe will decline by nearly 30 percent in value between 2005 and 2011, music downloads will grow exponentially to help fill the gap, according to Forrester Research (Nasdaq: FORR). The European physical music market is forecast to decline from €9.1 billion in 2006 to €7 billion in 2011, but music downloads to PCs and mobile phones will help the overall music market actually increase to nearly €11 billion. Much of this will be straight substitution, particularly among young consumers, and will change the way they consume music — resulting in a shift of focus from albums to singles.
According to Rebecca Jennings, Senior Analyst, Consumer Markets at Forrester Research: “At present, legal downloads to PCs and mobile phones account for less than 2 percent of the value of the European music market. However, the market is set to expand rapidly, growing to 36 percent of all music sales by 2011, as long as suppliers are prepared to meet consumer demands for flexible, easy-to-use services with competitive pricing models. Over the past year, the market has seen significant trends, including an explosion in both the value and volume of legal downloads; downloads to mobile phones becoming increasingly prevalent in Europe and Asia; and the UK, France, and Germany dominating the European music download scene. These three markets alone account for 80 percent of legal music downloads to PCs in Europe. Consumer adoption of both portable music players and Internet-capable mobile phones is accelerating, and consumer interest in downloading and legal sites is also increasing.”
However, the industry still has several hurdles to overcome if it is to take music downloads mainstream. The lack of standardization around formats and devices frustrates many users; the portability and flexibility of downloaded tracks remains vital, with consumers likely to turn away from services that limit track usage with overzealous digital protection. However, there are signs that this is changing, with the current moves in France to force companies to make downloads available for all devices. Finally, inconsistent pricing — both between services, for similar tracks from the same service, and between countries — is another challenge for consumers.
To understand how these positive and negative forces will ultimately affect the industry, Forrester used data from the IFPI, the BPI, and its own Consumer Technographics® data to forecast legal music downloads to PCs and mobile phones in Europe for the next five years. We forecast that this European market will reach just €279 million in 2006, or 3 percent of the total music market; by 2011, this will have grown to €3.9 billion, or 36 percent of the market.
Jennings added: “Music downloads will grow an average of 74 percent per year, and downloads to PCs will dwarf downloads to mobile phones. While the overall music download market will be worth €3.9 billion in 2011, just €700 million will come from mobile phones. Problems like poor usability, uncompetitive prices, a lack of flexibility, and limited consumer usage of their phones’ Internet capabilities will constrain the download of full music tracks by mobile phones for years to come.”
The UK, France, and Germany currently account for four-fifths of the value of European legal music downloads to PCs, and they will continue to make up half of this market through 2011. In 2005, the UK legal PC music download market was worth €52 million, compared with Germany’s €42 million and France’s €20 million. This will have changed by 2011, when the German market will take €672 million, versus €514 million in the UK and €472 million in France. Thirteen other European countries will see major growth in music downloads to PCs — from €27 million in 2005 to €1.6 billion in 2011, collectively.
Jennings noted: “To take advantage of this growth, music services need to take recognize the social computing phenomenon, encouraging users to forward clips to friends and create online buzz around new singles. They will also need to help potential downloaders concerned about illegal files corrupting their computers by providing online support and emphasizing the legality and quality of their services. In addition, mobile services must make it easier and cheaper for consumers to download music via their mobile phones — and face the fact that investment in mobile download services won’t generate significant returns from the start.”
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Forrester surveyed 19,046 European consumers in October/November 2005 in France, Germany, Italy, Spain, and the UK about how often they download music as part of its Consumer Technographics® European Study. The forecast looks at legal real music track downloads to PCs and mobile phones — not other types of mobile phone downloads like ringtones. Forrester also drew on data from the British Phonographic Institute (BPI) and International Federation of Phonographic Institutes.
About Consumer Technographics®
Forrester’s Consumer Technographics research is the largest and longest-running technology research effort in the world, providing the most accurate view of the impact of emerging and established technologies on consumers. It provides unparalleled insight into how consumers evaluate, buy, and use technology. Since launching Consumer Technographics in 1997, Forrester has surveyed more than 2 million households and individuals in North America and Europe.