December 23, 2001

Jupiter Media Metrix reports that regardless of the current market downturn, US digital music sales -via digital subscription models and single paid downloads -will generate $1.6 billion in revenue by 2006, with $1.0 billion, or nearly 63 percent, coming from subscriptions alone.

"Digital music subscriptions have the potential to revive the flagging music industry," said Aram Sinnreich, Jupiter senior analyst. "The key to unlocking this market will be remixing the distribution chain-taking advantage of digital media's fluidity to allow labels, music sellers and technology companies to focus on what they do best. Thursday's Plug.In, the B-Sides teleconference will bring together the industry's top players for two hours to further investigate how the business models for subscription services can reach full potential."

"The music industry is evolving too quickly to restrict Plug.In to once a year," said Mike May, vice president of events for Jupiter Media Metrix. "There's simply too much demand from Jupiter clients for research and analysis on the music industry. Jupiter's Plug.In, the B-Sides helps keep the industry tuned in to new developments in online music year-round, making the discussions and networking at the upcoming July Plug.In event that much more informative, productive and valuable."

Growth of Subscriptions to Pit Media Against Retailers

By year-end 2003, subscriptions will be the dominant digital music product format. According to Jupiter analysts, the growth of subscriptions as a product category will open a new front in the online music wars, pitting retailers against media companies. As the product category matures, Jupiter analysts envision digital music subscriptions that would look less like traditional music products and more like programmed, entertainment environments found on media sites or on TV. This intense battle for subscribers that will soon result between media companies and music retailers will fuel product innovation and lead to a $1.6 billion digital music market in 2006.

Growing Market, Growing Pains

Jupiter analysts now forecast that the online music market will grow to $5.5 billion in 2006 - up from $900 million in 2001. The economic downturn coupled with a later-than-anticipated launch of the online subscription music services and lower overall consumer spending on music caused Jupiter to revise its original July 2001 music forecast of $6.2 billion. Jupiter analysts believe that online music growth will be a strong catalyst for the growth of overall music sales, with the former accounting for nearly a third of total US music sales in 2006.

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