Digital distribution over the Internet will account for eight per cent, or $4 billion of total global music sales by the year 2004.
According to research company Market Tracking International's report it will rapidly jump to 20 per cent by the year 2010. The US is expected to dominate the digital music market, taking $2.28 billion of online sales in five years.
Around $228 million is expected to be digitally downloaded. Japan is forecast to be the second largest market followed by the UK, Germany and France.
Although digital distribution will open up a whole new avenue for the music business, MTI warns that initially it will have problems weighing up the advantages and disadvantages. This is bound up with format and piracy issues.
The surge of support for the MP3 format amongst consumers has sent record companies running to come up with a secure digital distribution system, having written it off initially as a youth cult phenomena. They are also under a lot of pressure from artistes who want to release tracks on the Internet. Some, like the Beastie Boys, are going ahead and releasing certain tracks in digital format on the Internet.
The report warns that although digital distribution will give the record industry a new wave of sales channels and opportunities, its current management and operation structure may not be able to cope without drastic change.
The music industry's high margins and regional price differences will also leave it wide open to a price war online, much the same as online bookstore Amazon.com triggered off in publishing.
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