A top music executive on Thursday said strong music download sales over Christmas from artists like chart-topping hip-hop Outkast with their hit "Hey Ya!" have set the beleaguered industry up for a promising year.
"The market is exploding, and as more significant retailers join the fray, we expect this market to continue to grow," said Larry Kenswil, president of eLabs, the new business and technology division of the world's largest music label, Universal Music Group .
"And Europe is next. Just about all the players roaring in the U.S. are preparing to come here. There is no reason to think they won't be just as successful here," he said, addressing a gathering of media and technology executives at a conference hosted by the Royal Society for the Encouragement of Arts.
Industry observers say it is far too soon to call a recovery. The $30 billion industry is bracing for a fourth consecutive year of declining sales as they struggle to find a solution for online piracy and win over a consumer base that spends more on DVDs and video games.
Still, the small, but growing demand for music downloads on such online music stores as Apple Computer's iTunes and Roxio's Napster (news - web sites) and RealNetworks Liquid Audio offers a rare glimmer of hope for the battered industry.
THE FIRST MEANINGFUL YEAR
Outkast's "Hey Ya!" was the most downloaded song for 2003, with over 110,000 downloads, Kenswil said. The artists, signed to the BMG label Arista, hold the new distinction of topping the virtual and real-world charts.
In the Christmas week, 2.5 million songs were downloaded by U.S. consumers and 30 million songs were downloaded for the full year, said Kenswil, citing data from Nielsen Soundscan, which tracks U.S. music sales.
Last year, Kenswil said, was the first significant year for music downloads. Major industry-backed download services began in previous years, but were largely ignored by consumers as they carried a meager song library and a confusing array of tariffs.
The European market is small, too, as the likes of Britain's OD2 struggle to win over paying consumers from file-sharing networks such as Kazaa and eDonkey. Industry executives believe the likes of iTunes and Napster will arrive in Europe by summer. With an average price of 99 cents per song, the U.S. download market, far and away the world's largest, represents a minute fraction of total sales. But record executives are optimistic the recent success of online music stores in America will catch on in other territories.
"Record companies cannot compete with free, unless we have compelling consumer services," Kenswil said.
Kenswil said the best-selling bands in stores are also topping the charts online. But, he added, obscure artists who rarely sell a CD in stores are selling online.
"Apple has sold almost every track they have. Even the most obscure thing -- someone has bought it," he said. "All of this data, we're just starting to dig into it."
