Hot Stuff

Downloadable Music

The recent scourge of the music industry may prove to be a blessing once major record labels embrace formats like MP3, Liquid Audio, a2b, MS Audio and G2. "Consumer demand is tremendous and will continue to grow as awareness grows and technologies and bandwidth improve," says Aram Sinnreich, an analyst of consumer content strategies with Internet research firm Jupiter Communications. "The majority of music from major labels, which comprise roughly 80 percent of the market, has yet to be put into a downloadable format. As soon as that happens, it's going to be a major force in the overall music economy."

Currently, digital music sales are little more than a blip on the radar screen, but Jupiter projects by 2003, digital distribution revenues will reach $147 million, or about 6 percent of online music sales. The main question is whether the majors control online sales as they do the offline industry. "It's not clear who's going to win yet," says Sinnreich. "With the online [format], you have the opportunity for everyone to become a music retailer. And everyone-from music labels to fans-is going to try and horn in on that game."

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This article was originally published in the December 1999 print edition of Entrepreneur with the headline: Hot Stuff.

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