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Business News (more headlines) 09-05-2012

Music Feels The Benefit Of Bundling As Ovum Predicts Subscriptions To Drive 15% Growth In Digital

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The global digital music market is expected to grow at 15 percent annually, reaching nearly USD$22.5 billion by 2017, according to global analyst firm, Ovum. Revenue is being boosted by subscription services, predicted to show a strong compound annual growth rate (CAGR) of 46 percent, much of it on the back of bundling partnerships with service providers.

New forecasts* from the global analyst firm reveal growth across most regions, except North America and Europe, where mobile music is expected to decline by 5 – 7 percent (excluding unlicensed, non-music, and mobile subscriptions) as ring back tones fail to make up for the decline in ringtones.

Mark Little, Ovum's consumer telecoms analyst, explains: "The decline in the growth rate of mobile music from previous forecasts is mainly due to the underperformance of ringback tones, the dominance of free ad-supported music, and data costs that are making over-the-air (OTA) mobile music less appealing to consumers."

While mobile music is having a rough ride (particularly in the west), consumers are recognising the benefits of the subscription model, being able to access tens of millions of streamed songs for the price of a CD every month rather than owning individual downloads. Telcos are helping to drive subscription growth with mobile music bundles, leading to significant growth in South & Central America, for example, with over 50 percent CAGR.

Little foresees, "In Asia Pacific, growth created by consumers migrating to subscription services such as Lismo Unlimited from KKBOX in Japan will result in a regional CAGR of 44 percent. With Spotify landing in the US, joining Rhapsody, Sony Music Unlimited, Rdio and MOG, such brands are helping reinvigorate on-demand subscriptions, and we estimate a 40 percent CAGR over the forecast period."

Little concluded: "We expect the main driver of digital music in the forecast period to be subscriptions, because it is a format that can be easily bundled by service providers, as well as offered directly, resulting in increased penetration of subscriptions around the world".

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