Music download services like Napster and Gnutella may be popular but consumers are ready to pay for their music online according to US research firm Jupiter.
In figures launched Monday to coincide with the start of the Jupiter Online Music Forum in New York, the research firm predicts that the American online music industry will be worth $5.4bn by 2005 -- that's one quarter of total US music sales.
The figures are significant because online music is unquestionably a major factor in the consumers' mind, despite the absence of any major initiatives online by the big five music companies.
Although Napster continues to be popular -- attracting ten million users in ten months, with over half of US college students weekly visitors -- Jupiter's research reveals that consumers are also keen to see subscription-based equivalents of Napster. Such services will account for the lion's share of the market -- $980m compared to $531m for a la carte downloads.
The challenge for subscription services will be in persuading consumers to move away from free services, which Jupiter predicts will happen by guaranteeing file quality and offering virus protection rather than by bundling extra content
Jupiter analyst Aram Sinnreich believes people will eventually buy more music online than offline despite efforts to demonise Napster and MP3.
"Record labels and intellectual property owners have demonised various forms of online music sharing, even as it has gained enormous traction among consumers, but the truth is that a better-informed user will purchase more music products online that off."
This week Napster will find out whether the RIAA's (Recording Industry Association of America) attempts to get the software firm closed down has been successful. According to figures from Rio -- the digital music division of S3 -- Napster has had a profound effect on music sales around colleges with a 38 percent reduction in offline buying.
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