With falling CD sales and single downloads failing to pick up the revenue slack, the music industry worldwide has been singing a sad song for the last few years, but that tune is about to change — along with almost everything else in the music business.
"eMarketer estimates that the worldwide market for recorded music, live music and music licensing will reach $67.6 billion by 2011, up from the 2006 total of $60.7 billion," says Paul Verna, eMarketer Senior Editor and author of the new Global Music: Tuning into New Opportunities report. "Over that period the industry will grow at an average annual rate of 2.19%."
Sales of CDs, which currently account for 55% of the industry's total revenues, will continue to decline sharply, falling to 29% of the overall business by 2011.
On the other hand, digital music has been growing exponentially in the past few years and is expected to continue on a healthy growth trajectory, reaching $14.8 billion in worldwide revenues by 2011.
The question on the minds of everyone in the recording industry, however, is: Will the digital segment compensate for the losses in physical sales? The answer is a qualified "no."
"Nevertheless, growth in other sectors will make up for the shortfall in CD sales," says Mr. Verna, "resulting in net growth for the industry as a whole."
That growth will come predominantly from online and mobile music, the live concert industry and the licensing of music for public performances, commercials, TV shows, films and video games.
From a marketing perspective, these growth areas happen to lend themselves to creative brand exploitation.
"In fact, the climate for marrying brands to musical artists has never been more favorable," says Mr. Verna. "Whereas in the past, rock musicians tended to view commercial associations as 'sellouts,' today the media landscape is rife with name artists who have attached themselves to top brands: U2 and the Apple iPod, Bob Dylan and Victoria's Secret, Robbie Williams and T-Mobile — and the list goes on."
With new revenue streams available to artists, songwriters, publishers and record companies, the importance of CD sales relative to the overall mix is diminishing. As Jeff Rabhan, an artist manager, told The Wall Street Journal, "[CD] sales are so down and so off that, as a manager, I look at a CD as part of the marketing of an artist, more than as an income stream. It's the vehicle that drives the tour, the merchandise, building the brand, and that's it."
"In the music business, the beat may be changing," says Mr. Verna, "but the beat goes on."
For a look ahead at all the many changes coming to the music industry, read the new eMarketer Global Music: Tuning into New Opportunities report today.
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