Jupiter: Online music sales to soar 520 per cent

US online music sales are due to soar 520 per cent over the next five years to $US6.2 billion, according to a report released Monday from Jupiter Media Metrix Inc.

This compares to projected online music spending of $1 billion for 2001, and represents a 43 per cent annual growth rate in online music sales over the next five years.

Still, online music shopping -- including both digital downloads as well as music ordered online -- will represent just a fragment of overall US music consumption. Jupiter predicts online music spending will represent 7 per cent of total music sales for 2001, but will grow to 32 per cent by 2006.

Digital music sales, through single paid downloads and digital subscription models, will account for 3 per cent of total online music sales in 2001, however, and swell to 30 per cent of all online sales in 2006. Digital music spending over the same period will jump from US$29 million to $1.9 billion.

Digital music sales will also see a shift from single-paid downloads to subscription services, Jupiter predicts. This is good news for subscription contenders MusicNet, a joint venture between AOL Time Warner, Bertelsmann AG, EMI Recorded Music and RealNetworks, and Pressplay, backed by Sony Music Entertainment and Universal Music Group, which are scrambling to get their services available before the end of the year.

Although growth is predicted for these subscription players, the future of subscription services are still unclear, said Jupiter analysts at the researcher's Plug In forum in New York Monday.

According to Jupiter Senior Analyst Aram Sinnreich, the labels' attempts to strike back at startups and innovators like Napster Inc. "aren't going to fly."

"The (traditional music) retailers aren't going to appreciate it," said Sinnreich, "and consumers are going to want what they had," meaning free music.

But as Kevin Conroy, senior vice president and head of AOL Music, pointed out at the forum, "In absence of choices, people make decisions they wouldn't otherwise make."

AOL announced a new music strategy Monday and is planning to offer MusicNet through its AOL 7.0 client due out later in the third quarter of this year.

Given the potential growth, many more players are likely to jump online to snag part of the music market.

But whether they succeed or not will depend on consumers.

"The models that succeed will depend on what users want," said Conroy.