Piracy is not responsible for the 15 per cent drop in music sales over the past two years and if the record industry does not embrace the internet culture it will see sales suffer even more, according to new research.
Analyst Forrester says that the only way record labels can restore industry growth is by making it easier for people to find, copy and pay for music on their own terms.
If the record industry itself adopts the currently frowned upon techniques of publication such as downloading and burning of music files to CD, by 2007 digital music revenues will reach more than $2bn, according to the analyst.
Forrester said that in the next two years, labels will struggle to deliver on the promise of digital music, and that their services will fall short. But by 2005, labels will endorse a standard download contract that supports CD burning and a greater range of download devices.
"There's no denying that times are tough for the music business, but not because of downloading. We see no evidence of decreased CD buying among frequent digital music consumers," said Josh Bernoff, principal analyst at Forrester.
He said that the labels had to look at other ways of satisfying customers' needs.
"First, consumers will demand their right to find music from any label, not just two or three. Second, they want the right to control their music by burning it onto CDs or copying it onto an MP3 player. Finally, consumers will demand the right to pay by the song or album, not just via subscription services."
Although record sales have seen a 15 per cent drop in profit over the last two years, Bernoff said that the internet was not to blame. And if the labels play their cards right revenue from downloaded music could soar by as early as 2005.
By 2007, this new business model will generate $2.1bn, or 17 per cent of the music business, said Forrester. "Artists will embrace the internet and sign downloading rights over to their labels - or see sales suffer," the analyst said.
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