Apple's move to launch a music download service may yield the company a slice of a massively expanding market, predicts analyst Forrester Research.
In a report released yesterday, the analyst predicts that the digital music download service will be worth an impressive 1.3 billion Euros (just under £1 billion) by 2007. The sector will generate just 24 million Euros this year, but will account for 13 per cent of all music sales by 2007, the analyst says. The US market will be worth $2 billion by 2007.
This will mostly come from individual downloads, not subscription-based services. "Growth will be fuelled by the emergence of more legitimate services and higher broadband penetration," Forrester claims.
Research analyst Rebecca Jennings said: "Recent announcements from EMI and Apple show that after a slow start, major music and technology companies are now taking the future of digital music seriously.
"While the US market for legitimate music downloads is already off the starting blocks - reaching $15 million in 2002 - the European market has lagged. This is because official services focused on the US only, and European home broadband penetration has been far slower to take off. But over the next few years, digital music delivery will ramp up," she observed.
The report expects consumer demand to force labels to expand into the European market. It claims broadband users to be 123 per cent more likely than narrowband users to download MP3s.
"European consumers are already keen buyers of singles - in 2002, Europeans bought around 165 million singles, compared with sales of just 9 million in the US," Jennings said.
She expects European consumers to "start their downloading routine" with singles - 42 per cent of European digital music sales will be of singles, she says. Consumers will move toward album downloads as confidence in the format grows, she says. Album sales will account for 49 per cent of downloads by 2007, she suggests.
There is a place for subscription-based services - two million subscribers will spend 125 million Euros on these services by 2007, the analyst claims.