Reports See Bright Spot In Tough MP3 Market

by Gavin O'Malley, Jan 20, 2005, 12:20 AM

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Some high notes were heard Wednesday amid a recent chorus of criticism over online music stores' ability to meet consumer demands.

The International Federation of the Phonographic Industry said that tracks sold online increased tenfold last year, and that the number of music stores quadrupled to 230. A key factor to the success of the industry--tracks available online--doubled year-over-year, the IFPI said.

While traffic to e-commerce sites took a post-holiday plunge, Hitwise reported that Apple Computer's site and its Apple Store site drew 6 percent more surfers than over Christmas week. Hitwise attributed the current spike in interest to the "intense enthusiasm surrounding last week's Macworld," due to the introduction of Mac's Mac Mini and the economical iPod Shuffle. The success of iTunes is universally attributed to the success of the iPod.

Visits to both apple.com and store.apple.com, said Hitwise, hit their highest traffic levels over the week ending Jan. 15--exceeding the week ending Jan. 1 and the week ending Dec. 25.

Hitwise noted an "immediate viral impact among several Apple-centric blogs," such as Thinksecret.com, published by Harvard undergrad Nicholas Ciarelli, which broke the product news days before Apple CEO Steve Jobs announced it at Macworld. (Apple is now suing Ciarelli.)

Deloitte's technology, media, and telecommunications group, a division of Deloitte Services LP, predicts legal music downloads' rapid growth over the coming months. Illegal downloading, however, will continue to dominate the field, according to their forecasts. Deloitte's flushed outlook is ascribed to the growing quality of online stores, the increase in the installed base of digital music players, the inclusion of CD burners as standard features in computers, and the "exceptional" quality of legal downloads.

But while the IFPI cited piracy and illegal peer-to-peer sharing as the biggest threat to the industry's future, critics say online music stores have been successfully mucking up the industry all by themselves. Earlier this week, market researcher Shelley Taylor & Associates released a report charging music stores with offering confusing navigation and locking customers into proprietary formats and music players.

More generally, Forrester said Wednesday it was predicting modest but significant growth in the e-commerce platform market, from the $1.3 billion spent globally in 2003 to around $1.54 billion in 2008.

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