Asian online music market to hit US$307 million

SINGAPORE--Revenues for digital music downloads in Asia Pacific (excluding Japan) is expected to hit US$307 million by 2004 despite bandwidth constraints, expensive labeled digital music and "rampant piracy."

Last year, sales from online music downloads in the region amounted to less than US$2 million while online sales of physical format music reached US$27 million.

Growth is expected to come from a maturing base of Asian Web users, improving Internet infrastructure and more sophisticated online music offerings, International Data Corp Asia Pacific said in a statement today.

"The physical music format will remain dominant although digital music downloads will be the fastest growing segment of the (overall) market," said IDC senior business-to-consumer analyst (Internet Research) Jasmine Soo.

The Napster revolution has shown that consumers want to develop their own customized digital music libraries, Soo observed.

To tap into the burgeoning market, IDC believes that online music sites need to explore offline payment options, partner broadband access providers for faster downloads and consider the music-on-demand business model, among others. IDC did not elaborate and could not be contacted at press time.

The market research firm also believes that online music sites need to provide a variety of music titles, regardless of label, in order to succeed.

Moving forward, IDC sees four types of online music sites emerging: independent, single-label, multiple-label, and multiple-label peer-to-peer networks.

Peer-to-peer networks allow PC users to exchange files with one another without going through a centralized server as demonstrated by online music-swapping service Napster.

Last October, German media conglomerate Bertelsmann announced an alliance with Napster to develop a new subscription service to let Net users swap songs copyrighted by the recording giant.

Members of the proposed service would be able to search and download songs--legally--from Bertelsmann's entire catalog of artistes, which includes Santana, the Dave Matthews Band, Christina Aguilera and Whitney Houston.

"As the online music industry takes shape, record labels will need to develop innovative strategies to evolve with a rapidly changing market environment," Soo said.

Meanwhile, online sales of physical format music (in the form of CDs and cassettes) is expected to reach US$433 million by 2004. This will account for 59 percent of the total online music sales of US$740 million in Asia Pacific (excluding Japan), IDC said.

IDC’s survey of 40,000 Asian Internet users last year indicated that music CDs and cassettes were the second most common selling products online in Asia after books.

From:http://www.zdnetasia.com/news/business/0,39044229,10034533,00.htm