There are now 832 million paid users of digital music worldwide and that number is expected to almost double to 1.555 billion in 2014
While there has been much debate about the impacts of the global recession on consumer discretionary spending, IEMR is forecasting a significant increase in the number of users who will be accessing their music through various digital channels, including online downloads, mobile downloads, and subscription downloads of online portals. We are estimating that the total number of paid users of digital music worldwide will reach 832.5 million in 2010, and this number is going to increase to 1.555 billion by the end of 2014, for a Compound Annual Growth Rate (CAGR) of 16.9%.
This forecast is higher than our previous 3Q.2009 Digital Music Forecast and represents relatively robust survey data we have seen in our Global Consumer Telecommunications Survey Panel.
While the number of music users downloading their music through their mobile handsets will increase from 507 million in 2009 to over 1 billion in 2013, the greatest growth in the global digital music industry will happen through subscriptions to both online and mobile music channels.
While the mobile channel will continue to account for a large share of music downloads (its current market share is 70% of all users), we think that both the online single download users and online subscription users will see a higher growth rate over our forecast period. For online single download users, we are forecasting a subscriber CAGR of 20.6% (previously 25.4%), while for subscription users, our expectations are that these subscribers will grow at a CAGR of 58.9% over the next five years. Their base, however, will continue to be small, reaching about 28.8 million users by the end of 2014.
There are a number of reasons why we think that this growth toward a blended medium is reasonable to expect in the next five years:
1. While the recession will slow growth in paid digital music users, mobile downloads of music are generally more expensive, both in terms of traffic and content, compared to broadband downloads.
2. Given current saturation levels in mobile-centric developed markets (such as Western Europe), major growth in mobile subscribers is happening in developing markets. In these markets, both single download users and mobile subscriptions is a harder sell given the dominance of prepaid mobile subscribers in these developing markets.
3. In mature markets (such as Western Europe and North America), broadband penetration is already high and given broadband access pricing over the fixed network is significantly lower in these markets, we do not see uptake of Over the Air (OTA) music downloads, which tend to have a higher market share in markets such as Japan and South Korea.
Digital Music Retail Revenues to reach $32.5 billion at the end of 2014
IEMR is forecasting that global digital music revenues will increase from their current level of $7.8 billion in 2009 to $32.5 billion in 2014, for a CAGR of 37.1%.
Online digital retail spending (which includes digital downloads of full tracks, albums, music video and streams over the fixed network) was $3.5 billion in 2009. This particular market segment will see retail revenues grow by a CAGR of 33.1% to $13.5 billion in 2014. Trends driving this growth over the next five years include:
1. Broadband penetration to become more ubiquitous in developed markets: Our analysis of this market suggests that digital music download and streaming user numbers are strongly linked to fixed broadband penetration in developed markets (with the exception of Japan). With broadband penetration becoming even more ubiquitous over the next five years in these markets, we think that online retail sales will increase substantially over the forecast period.
2. Illegal file sharing becoming increasingly hard: While the recession will support illegal file sharing and free ad-supported models over the short term, ISP based legislation in both the United States and Europe will mean that users will increasingly have to pay for their music downloads.
Digital Music Revenues at Record Companies to reach $21.3 billion at the end of 2014
IEMR is forecasting Record company revenues from downloads of full tracks, albums, music video and streams over the fixed and wireless network will reach $21.3 billion in 2014, from our current estimated $4.82 billion in 2009.
We think that over the next five years, record companies will do a better job of increasing their subscription customers (subscription revenues will increase to $1.8 billion for record companies) and they have also seen the writing on the wall in terms of online access and will begin exploiting this channel more thoroughly over the forecast period. This will result in increased online revenues from digital music downloads of $8.8 billion in 2014 (for a CAGR of 31.2%). Trends driving this growth over the next five years include:
1. Music applications: Innovative music applications have developed over the past 2-3 years that will be exploited by record companies. These apps have additional interactive features, games and information that are proving very popular with customers and will likely be dominated by the record industry, despite recent moves by individual artists to "go solo".
2. Subscription Pricing models: We think that record companies will continue to experiment with various subscription pricing models. These are currently available with some labels that allow a certain number of downloads per month with links available for "all you can hear" purchases. We think, however, that subscription prices will have to drop significantly for this type of bundled proposition to work in favour of record companies.
North America
There are now 105.4 million paid users of digital music in North America and that number is expected to grow to 227.2 million in 2014
Despite the global economic slowdown, the North American digital music market remains strong. We expect that digital music paid download users in the United States and Canada will increase from 105.4 million to 227.2 million over the forecast period, 2010 – 2014 (Compound Annual Growth Rate is 16.6%. This is higher than our previous forecast of a CAGR of 12.9%).
Online music download users in North America will increase dramatically from 50.4 million in 2009 to 135.0 million in 2014
We expect that music users downloading their music through their mobile handsets in North America will increase significantly from 51.9 million in 2009 to 83.1 million in 2014 (CAGR of 8.4%, previously 4.5%). However, the greatest growth will happen through online and mobile subscription users. We forecast that digital music download subscription users will increase from 1.9 million in 2009 to 9.1 million in 2014 (CAGR of 44.9%).
Digital music retail revenues in North America to reach $11.86 billion in 2014
We forecast that digital music retail revenues in the United States and Canada will increase from $4 billion in 2009 to $11.86 billion in 2014, for a CAGR of 26.2% (previously 33.4%).
In particular, revenues from online single download users of digital music will increase from $2.3 billion in 2009 to $8.3 billion in 2014, for a CAGR of 30.9% (previously 44.0%). The strong growth in the use of the online channel is caused by high broadband penetration in North America. Revenue will continue to grow as illegal file sharing becomes more difficult with various legislation and enforcement.
Digital music revenues at Record Companies in North America to reach $7.293 billion in 2014
We expect that record company revenues from downloads of full tracks, albums, music video and streams over the fixed and mobile networks in North America will reach $7.293 billion in 2014, from $2.573 billion in 2009.
Record companies will be gaining more subscription customers over the next five years. We expect that subscription wholesale revenues (received by record companies) will increase from $108 million in 2009 to $528 million in 2014, for a CAGR of 46.1%.
South and Central America
Paid download users of digital music in South and Central America will increase from 41.3 million in 2009 to 98.8 million in 2014
The digital music market in South and Central America (including Mexico) is growing rapidly. IEMR forecasts that the number of paid users will increase from 41.3 million in 2009 to 98.8 million in 2014, for a Compound Annual Growth Rate (CAGR) of 18.7% (previously 16.7%).
Online music download users in South and Central America will increase dramatically from 10.7 million in 2009 to 39.7 million in 2014
We expect that the majority of paid download users of digital music in South and Central America will continue to use mobile networks. The number of mobile music download users will increase from 30.1 million in 2009 to 56.9 million in 2014. However, in terms of growth rates, subscriptions will increase most dramatically. We forecast that online paid download subscribers will increase from 53,000 in 2009 to 2.3 million in 2014 (a CAGR of 130.5%). We think that this is because mobile downloads of music are generally more expensive, both in terms of traffic and content, compared to broadband downloads and subscriptions allow for consumption of content both from online and mobile channels.
Digital music retail revenues in South and Central America to reach $1.1 billion by the end of 2014
We forecast that retail revenues in South and Central America’s digital music market will increase dramatically from $95.7 million in 2009 to $1.117 billion in 2014, for a CAGR of 73.7%.
Western Europe
Digital music paid users in Western Europe to increase from 87.4 million in 2009 to 173.2 million in 2014
We are estimating that the total number of paid users of digital music in Western Europe was 87.4 million in 2009, and this number is going to increase to 173.2 million by the end of 2014, for a Compound Annual Growth Rate (CAGR) of 13.8% (previously 11.7%).
Online single download users to increase from 67.6 million to 136.4 million over the forecast period, 2010 - 2014
In Western Europe where broadband penetration is high, the majority of digital music users download music online rather than through mobile networks. We forecast that online paid download users will increase from 67.6 million in 2009 to 136.4 million in 2014 (CAGR of 14.3%, previously 12.7%). Growth of mobile download users will be lower at a CAGR of 9.1%. The number of paid music download users using their mobile devices will increase from 18.5 million in 2009 to 30.6 million in 2014.
Digital music retail revenues in Western Europe to increase to $4.8 billion by the end of 2014
We forecast that digital music retail revenues in Western Europe will increase from $1.3 billion in 2009 to $4.8 billion in 2014, for a CAGR of 31.4%. As broadband penetration becomes more ubiquitous and illegal file sharing becomes more difficult, revenues from online single download users will grow dramatically over the next several years. We expect that retail revenues from online paid download users will increase from $0.804 billion in 2009 to $3.1 billion in 2014.
Eastern Europe
There are now 37.2 million paid users of digital music in Eastern Europe and that number is expected to grow to 71.8 million in 2014
We expect that digital music paid download users in Eastern Europe will increase from 37.2 million to 71.8 million over the forecast period, 2010 – 2014 (Compound Annual Growth Rate is 13.6%, previously 9.2%).
Online music download users in Eastern Europe will increase from 11.9 million in 2009 to 30.2 million in 2014
The Mobile channel will continue to account for a large share of music downloads in Eastern Europe. The number of users who download digital music using their mobile devices will increase from 24.9 million in 2009 to 40.7 million in 2014 (CARG of 9.5%). On the other hand, for online single download users, we are forecasting a subscriber CAGR of 20.3%. We expect that online music paid download users will increase from 11.8 million in 2009 to 30.2 million in 2013. The online channel sees faster growth in usage than the mobile channel partly because mobile download is generally more expensive compared to broadband downloads.
Retail revenues in Eastern Europe’s digital music market will reach $750.9 million at the end of 2014
We forecast that digital music retail revenues in Eastern Europe will increase from $105.8 million in 2009 to $750.9 million in 2014 (CAGR of 55.5%).
Revenue growth will be the fastest for online single download users. Retails revenues from online paid download users in Eastern Europe will increase from $8.7 million in 2009 to $189.9 million in 2014, for a CAGR of 80.4%.
Asia-Pacific
Paid download users of digital music in the Asia-Pacific region will increase from 421.5 million in 2009 to 925.8 million in 2014
Although consumers are willing to pay less for entertainment due to the economic downturn, we expect that the digital music market in Asia Pacific will continue to grow rapidly. IEMR estimates that the number of paid users will increase from 421.5 million in 2009 to 925.8 million in 2014, for a Compound Annual Growth Rate (CAGR) of 17.9% (previously 18.7%).
Mobile music download users in Asia Pacific will increase from 361.1 million in 2009 to 762.1 million in 2014
The majority of music downloads happen through the mobile channel in the Asia Pacific region. We expect that mobile music download users in Asia Pacific will increase from 361.1 million in 2009 to 762.1 million in 2014 (CAGR of 16.9%, previously 15.6%).
We think that both the online single download users and online subscription users will see a higher growth rate over our forecast period. Online single download users will increase from 54.6 million in 2009 to 148.2 million in 2014 at CAGR of 22.9%.
Digital music retail revenues in Asia Pacific will reach $13.7 billion in 2014, making the Asia-Pacific region the largest market for digital music retail revenues in the world
We expect that digital music download retail revenues will increase from $2.3 billion in 2009 to $13.7 billion in 2014, for a CAGR of 51.5%.
In the Asia Pacific region, most of the retail revenues come from mobile music downloads. Digital music retail revenues from the mobile channel will increase from $1.82 billion in 2009 to $10.9 billion in 2014, for a CAGR of 53.1%. On the other hand, retails revenues from online downloads (over the fixed network) will increase from $0.32 billion to $1.7 billion over the forecast period, 2010 – 2014.
Middle East and Africa
There are now 28.5 million paid users of digital music in Middle East and Africa and that number is expected to grow to 58.4 million in 2014
We expect that digital music paid download users in Middle East and Africa will increase from 28.5 million to 58.3 million over the forecast period, 2010 – 2014 (Compound Annual Growth Rate is 14.7%, previously 11.7%).
The number of music users downloading their music through their mobile handsets in Middle East and Africa will increase from 20.3 million in 2010 to 35.5 million in 2014
The mobile channel will continue to be the most common channel for downloading music in Middle East and Africa. We expect that mobile digital music download users in the region will increase from 20.3 million in 2010 to 35.5 million in 2014 (CAGR of 10.5%, previously 7.1%).
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