Downloading gives way to pay-for-streaming of songs

Musician Peter Gabriel's streaming services charge a monthly fee. Photo / Supplied

Is this a brave new dawn for the music industry in the digital era, or just another false one?

Research predicts digital revenues will soar to US$20 billion ($27 billion) over the next four years, and experts believe it will follow a "cultural shift" in how music is consumed in the internet era.

Research group Ovum yesterday released its forecasts for the music industry, predicting global digital revenues would soar from the US$7.5 billion recorded last year.

Yet the growth will no longer be just from those who want to download-to-own, but from streaming services such as Spotify and We7, which is backed by Peter Gabriel, as consumers realise they can have access to millions of songs online a month for the price of a CD.

Mark Little, analyst at Ovum, said: "There is a change in consumer behaviour towards access rather than ownership, and a series of new services have sprung up to support that. This behavioural shift is also being backed up by the major players in the industry."

About 29 per cent of the labels' revenue comes from digital music, up from 25 per cent in 2009, music body IFPI said, and they are increasingly realising the value of the streaming services.

Paul Smernicki, director of digital at Universal Music, said: "We are reaching a point that there are enough good digital services out there that the industry can be confident of that level of growth."

Ovum reports download-to-own growth in the US had fallen to 3 per cent last year.

Smernicki added: "For those doubting the potential of a subscription service should look at the TV industry 15 years ago, when pay TV was much smaller. Like that, people are beginning to understand and change. It is a cultural shift; though there is still a way to go." The economics of such services are finally making sense, say analysts.

The big players are certainly targeting streaming. Sony began Music Unlimited last month in the US, which features six million tracks from Universal, EMI, Warner and Sony Music. Google is to launch its own music service, while experts have predicted Apple will start a streaming service this year.

There are more than 60 digital services operating in Britain. "Five years ago there were only a few and they didn't work that well," Smernicki said.

"Now there are services regardless of the music you're into or the price you can pay and they are available on more devices. These services are now better than the illegal ones."

There has been a growth in "freemium" sites, which offer an ad-supported, free streaming model, alongside a premium, paid-for service.

Laurence Egglesfield, technology, media and telecoms consultant at KPMG, said: "Streaming is the future; consumers are ready for subscription-based service."

While customers are coming around to the idea that they will not own their own music, but it will be in "the cloud", the devices, especially mobile phones, have also reached a stage where they can support these services on the go.

Analysts said streamed music services offered natural "bundling opportunities" with telecoms companies and internet service providers.

The spectre of piracy still looms large. IFPI chief executive Frances Moore said digital piracy remained "the biggest threat" to the future of creative industries. In some countries as much as 95 per cent of downloading is illegal.

Yet it seems the music industry can look forward with more confidence than before: "The enthusiasm for music in the UK is not diminishing. The new services and the shift in cultural understanding means that this is a good news story for the industry," said Smernicki.

- Independent