Consumer Rights
August 18, 2002
Forrester Report: File Trading Not To Blame

MP3s not source of music industry woes, by Jack Kapika for The Globe and Mail.

Forrester's latest study, released Tuesday, says that consumers need a "Music Bill of Rights" to protect their right to get tunes over the Internet.

The five major international record companies, through their trade organization, called the Recording Industry Association of America, have been blaming a 15-per-cent drop in record sales over the past two years on Net-based file-swapping services, starting with Napster.

In reality, other factors led to the drop in revenue, Forrester said: the economic recession and competition from surging video-game and DVD sales.

"There is no denying that times are tough for the music business, but not because of downloading," Forrester's principal analyst, Josh Bernhoff, said. "Based on surveys of 1,000 on-line consumers, we see no evidence of decreased CD buying among frequent digital music consumers."

...The road ahead will be rough, the Forrester study cautioned. The record companies will spend the next two years struggling as they try to deliver digital music while testing out various technologies and legal moves to stop people from swapping the songs.

But by 2005, Forrester predicts that the five big labels will endorse a standard download contract that supports burning and a greater range of devices.

That will lead to soaring sales as finding content becomes effortless and impulse buying sets in. Labels will make content available on equal terms to all distributors, while on-line retailers become hubs for downloading.

By 2007, the new business model should generate 17 per cent of the sales in the music business, Forrester predicts.

Full text of article in case the link goes bad:

http://www.globeandmail.com/servlet/ArticleNews/front/RTGAM/20020813/gtmusic

POSTED AT 6:24 PM EDT Tuesday, August 13
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MP3s not source of music industry woes: Study
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By JACK KAPICA
Globe and Mail Update

The record industry has it wrong: Swapping music MP3s is not the cause of the industry's woes, but it may be the cure.

That conclusion comes from Forrester Research, an emerging-technology research firm, and flatly contradicts what the record executives are saying.

In fact, Forrester's latest study, released Tuesday, says that consumers need a "Music Bill of Rights" to protect their right to get tunes over the Internet.

The five major international record companies, through their trade organization, called the Recording Industry Association of America, have been blaming a 15-per-cent drop in record sales over the past two years on Net-based file-swapping services, starting with Napster.

In reality, other factors led to the drop in revenue, Forrester said: the economic recession and competition from surging video-game and DVD sales.

"There is no denying that times are tough for the music business, but not because of downloading," Forrester's principal analyst, Josh Bernhoff, said. "Based on surveys of 1,000 on-line consumers, we see no evidence of decreased CD buying among frequent digital music consumers."

Moreover, the Forrester paper predicts that music downloads will become big business, with sales reaching more than $2-billion (U.S.) by 2007. But it adds that the big surge in sales will happen only after 2005, when the record companies unite in their efforts to sell music together.

Under the analyst's proposed Music Bill of Rights, people will pay for the music they download, and will be happy to do so. It says that consumers must be able to find music from any label, not just two or three. They also want the right to control their music by burning it onto CDs or by copying it onto an MP3 player.

Finally, consumers will have the right to demand the ability to pay by the song or by the album, not just via the subscription services now offered by such experiments as Pressplay, MusicNet, FullAudio, and Emusic.

"We call this set of features which any paid music service must meet to satisfy customers the Music Bill Of Rights," Mr. Bernhoff said.

The road ahead will be rough, the Forrester study cautioned. The record companies will spend the next two years struggling as they try to deliver digital music while testing out various technologies and legal moves to stop people from swapping the songs.

But by 2005, Forrester predicts that the five big labels will endorse a standard download contract that supports burning and a greater range of devices.

That will lead to soaring sales as finding content becomes effortless and impulse buying sets in. Labels will make content available on equal terms to all distributors, while on-line retailers become hubs for downloading.

By 2007, the new business model should generate 17 per cent of the sales in the music business, Forrester predicts.

The company painted a picture in which big song hits will prompt people to download them directly to their cellphones, portable players or PCs. Artists will also embrace the Internet and sign downloading rights over to their labels, it said.

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