European Digital Music Market Finally Out of the Starting Blocks

You might well see a few headlines over the next couple of days, highlighting Jupiter’s European Digital Music forecasts. The key take away is the after years of underperformance the European digital music market finally got going in 2005 with revenues of €192 million, which was a huge growth of 267% from 2004. However, it’s worth keeping a sense of perspective for a couple of key reasons:

1 – Those revenues only represent 2.2% of total revenues – the CD is still well and truly king
2 – Only 5% of European Internet users paid for digital music in 2005 – paid digital music is still a niche activity
3 – Apple dominate the market, so large share of what we’re seeing is actually the success of Apple rather than digital music as a whole.

Taking those disclaimers into consideration, there is still a decent story to be told though. With declines in recorded music sales slowing, a couple of percent in digital can be the difference between being in the black or in the red. Layer in ring tones and mobile music downloads and digital becomes a crucial part of any record company’s business in this leaner, more competitive music market. Thus when you hear Universal music talk about growth in digital offsetting declines in physical format they are very much in line with the overall market.

Another key element of the European digital music market worth noting is some very strongly positioned local players, such as KPN’s Music Stream in the Netherlands and Deutsche Telekom’s MusicLoad in Germany.

2006 will be a key year for digital music and it will see subscription services, such as those offered by Napster, HMV, Virgin and Wippit consolidate revenues. A big question for Internet based digital music though, is whether mobile downloads will cannibalise growth or exist as a complimentary revenue stream. Which just happens to be one of the panel discussions we’ll be having at our free Plug.IN conference on March 15th. There are still some places left, but they are getting snapped up, so if you want ot come and haven’t registered yet, click on the link below.

JupiterResearch’s Plug.IN Music Forum, London, England
These issues and other key trends in Internet and Mobile music trends will be discussed at JupiterResearch’s Plug.IN Digital Music Forum in London on March 15th at the RSA. The free admission event will feature a keynote from Pascal Cagni, Apple’s EMEA VP and General Manager, JupiterResearch analyst presentations and round table discussions featuring other leading industry experts. The Forum is being produced in association with New Media Age.