Online Music: Jupiter Skeptical, Providers Charge Ahead
The new Napster will operate on a subscription or on a fee-per-song basis, allowing users to search for music, listen to customized preprogrammed radio, burn CDs and download nearly a half-million songs licensed from recording companies. Unlike its famous predecessor, the new Napster won't allow customers to share files, eliminating potential litigation.
Roxio is the latest addition to the race to convert the downloading craze into a profitable business. In April, Apple launched an iTunes, rekindling the public's interest such programs, which allows users to download songs for 99 cents each and keep them indefinitely in their computers. Other services, such as MusicNet, pressplay and Listen.com's Rhapsody, charge a monthly fee for access to an unlimited number of songs.
Also, AOL is planning to introduce a similar service later this year and Amazong.com has expressed interest. Buy.com reportedly plans to spend about $40 million to launch a service called BuyMusic.com and RealNetworks Inc. is planning to start an online music store by the end of the year. And, Musicmatch Inc. just signed nonexclusive agreements with nine labels, including EMI Group, BMG Music and Universal Music Group, to provide music for its download service to be launched broadly this fall.
Jupiter, however, expects the online music market to more than triple to $3.3 billion in 2008 from less than $1 billion in 2003; far below last year's estimate of $5.1 billion in 2007. Jupiter Research Senior Analyst Lee Black, says that total digital sales -- downloads and subscriptions - will not surpass $80 million this year. "The industry is suffering from competition for entertainment dollars, changing demographics, the end of the CD upgrade cycle and piracy," Black said.
To date, only 17% of online adults say that they've cut back on their file-sharing due to fear of legal consequences, according to Jupiter.