Online music disappoints

Michael Carroll
09 Mar 2011

Record labels are failing to compete with online music services like Spotify in an industry that, overall, is not living up to its potential, Ovum analyst Mark Little claims.

Headline figures from the firm predicting digital music revenues of $20 billion (€14.3 billion) in 2015 point to a healthy market, but could distract attention from the fact that firms offering online and mobile music are not maximizing their earnings, Little warns.

The Ovum staffer believes a proliferation of free music services including streaming music service Spotify and Web radio operations Pandora and Grooveshark are undermining the market for straight downloads, but are failing to cash in on “advertising or premium subscription revenues for themselves or the industry.”

Spotify, however, may beg to differ. The firm confirmed yesterday it has signed up a million paying subscribers in Europe in the space of two and-a-half years, equivalent to 15% of its total user base.

The music service estimates it is now Apple’s largest rival, however Little notes that all major mobile music players – including Google and Sony with its Music Unlimited service – will fuel an overall rise in subscriber numbers.

Asia Pacific is shaping up to drive the lion’s share of that growth, with Ovum predicting the region will generate 35% of revenues in 2015.

The research firm notes that music downloads in the US have already fallen 5% due to the volume of free music available, and predicts the trend will spread to Europe soon.

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