Digital music revenues climb the charts

Digital sales in the USA now account for nearly 30% of the total US music market while in Europe it is around 20% according to the latest update from research company Point Topic.

“Record company revenues from digital sales are estimated at around $2.9 billion in 2007, up 40% on 2006. This is roughly split half and half between online and mobile sales,” says John Bosnell, Senior Analyst at Point Topic.

According to some estimates there were around 1.7 billion single music tracks legally downloaded in 2007, an increase of 53% on 2006. According to recent data iTunes alone sold around 2 billion songs between January 2007 and January 2008 raising its revenue from track sales in the last year to $1.9 billion.

Apple’s quarterlies for Q108 have been the strongest to date, however nearly all profit still derives from selling the hardware and there are indications that even iPods are starting to be left on the shelf.

Apple are well aware of this and continue to expand their content offerings and partnerships. The company’s largest markets are USA, UK, France and Germany. By contrast, despite a good start in Japan Apple’s revenue declined by 11% in 2007.

The Japanese market showed the potential for mobile singles during 2007. For example, Japanese group GReeeeN sold over 1 million full tracks downloads to mobiles. The majority of Japanese users download tracks over the air (OTA). On the other hand, in USA and Europe most popular is sideloading – tracks are downloaded to the PC and then transferred to a mobile phone.

Global 3G sales are starting to increase sharply, up more than 50% in 2007 and mobile subscriptions are still growing, up more than 20%.

Increased mobile bandwidth and penetration is a significant driver in the OTA market and Point Topic expects to see more growth in the OTA market in 2008.

Apple still dominates the download and hardware markets while the rest is shared among other suppliers, Napster, Rhapsody, Zune and an increasing number of mobile operators.

Overall, it is estimated that there are 498 online services offering tracks downloads available in over 40 countries.

”We believe that the consolidation of the digital music market is inevitable. There are still hundreds of online music suppliers worldwide, over 300 in Europe alone’, says John Bosnell. ‘2008 and 2009 will see buyouts for some and bankruptcy for others.’