Net music sales to grow 2000 per cent by 2002

But it's still a 'small earthquake, not many dead' story

Sales of music via the Internet are set to expand by nearly 2000 per cent over the next two years, according to research conducted by Market Tracking International (MTI), released today. But while that statistic sounds impressive, MTI's numbers show the industry's big players will continue to dominate. That's good news for a business that's gone into panic mode numerous times over the last few years when forced to think about what the Net could mean for its profits. MTI reckons Internet music sales will grow from $28.7 million last year to $550 milion in 2000, a near twentyfold increase. But while the music business as a whole will grow just ten per cent -- and given the quality of most releases over the last few years, you might think that a very generous growth rate -- the industry will still be worth some $44 billion in 2000, up from 1997's figure of $40 billion. Do the maths, and you get a share of just 1.25 per cent for Internet sales. Hardly the trouser-browning result the big labels and the music stores in particular have been frightened of. Arguably, it's quite the reverse. As important is the fact that the bulk of Internet sales will come from discs (ie. hardware) ordered from online retailers and not downloaded tracks (ie. software). MTI reckons music sold as software will account for just 10-15 per cent of that 1.25 per cent of the music market taken by the Net. True, $55-82.5 million is going to make some people a lot of money, but it's still a long way off the billions the industry majors are going to rake in. All of which makes the moves by the Recording Industry Association of America (RIAA) against Diamond Multimedia and its MP3-based Rio player seem even more silly than it did before. Then again, it's all lies, damn lies and statistics. Just before MTI released its figures, Internet music site the Internet Underground Music Archive (IUMA) released some numbers of its own. IUMA reckons that by 2002, online sales will reach 15 per cent of US music purchases, rising to 37 per cent by 2007. At that time, it says, 20 per cent of all music will be distributed as software. Where does the truth lie? Probably closer to MTI's predictions than IUMA's. The five big players -- Sony, Warner, EMI, Bertelsmann and Seagram (which recently saw its $11bn purchase of PolyGram from Philips go ahead) dominate music production and distribution, but those same players are still very unsure as to how they can fully embrace Internet technology. ®