Ars Technica crunches the numbers and finds that the end of the CD era is fast approaching:
Sticking with twelve tracks to an album, 16 million full albums equal 192 million tracks, or 35 percent of all paid downloads. Also, remember that album sales figures lump the downloads in with the regular CD sales, and 2.6 percent of all album sales were really downloads, just not on a piecemeal basis. With all of these numbers in hand, we can calculate the total market share downloads enjoy today, and it’s a healthy 7.3 percent. If we can assume that the ratio of full-album to single-track downloads stays relatively stable over time, the online market share was 2.3 percent in 2004. The 149 percent sales growth sounds good all right, but it’s nothing compared to a 220 percent market share gain from one year to the next.
So online downloading’s share of the overall music market tripled between 2004 and 2005. If growth comtinues at that pace, online download revenue should outpace physical CDs sometime in 2008, and CDs are likely to be an inconsequential fraction of the overall music market by the end of the decade.
The record industry would do well to think hard about how this tidal wave will affect their business strategies. In particular, they should be careful not to hand technology companies like Apple a dominant position in their industry using a misguided DRM strategy. If they think negotiating with Steve Jobs was tough last year, when he was generating 5% of their revenue, it will be much worse next year when it’s 25%!
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.
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