eMarketer has comes out with an interesting assessment of the entertainment industry—especially music, movies and video games—and highlights the economic challenges they face from the ‘disruptive influences of digital distribution’. Napster, Mininova and other types of digital downloads.

I’m interested in this as developing digital goods and other types of information products are proving fairly lucrative. Well, in a modest way. Here’s what eMarketer had to say.
“The music industry was knocked off balance by the emergence of the MP3 in the late 1990s and has not recovered, and Hollywood’s two core businesses, box-office receipts and DVD sales/rentals, have stopped growing,” says Paul Verna, eMarketer senior analyst and author of the new report, Digital Entertainment Meets Social Media.

He adds that “while the sales of video game consoles and software titles remain relatively strong, the industry’s future is shifting to digital distribution and ad-supported models.”

It takes music as an example: “spending on CDs and other physical sound carriers dwindled to $5.8 billion in 2008, down 60% from a peak of $14.6 billion in 1999.”

Bad news!

In 2009, the US recording industry will mark 10 consecutive years of declining CD sales.

More bad news!

US sales of recorded music will drop to $5.52 billion in 2013. This downward trajectory will extend a pattern that began in 2000, when physical sales started to decline after rising dramatically during the heyday of the CD.

“Online will experience healthy growth, mobile will trend slightly downward and physical will continue to plummet at accelerating rates,” says Mr. Verna.
“Unfortunately, the sum of online and mobile will not compensate for losses in physical, but it will slow down the rate of those losses to a 2.9% drop in 2013.”

Remember that in 2008, single downloads made up the bulk of digital music sales – over $1 billion.

NPD Group found that the percentage of US teens who downloaded or listened to music via social networks increased from 26% in 2007 to 46% in 2008. Many are gravitating to social sites via iPhone applications.

I don’t have an iPhone but more than 4 million users as of May 2009, and about 20% of the 1 million songs per month downloaded through affiliate links were from Pandora’s iPhone app.

I’m still not going to buy it though. Just too expensive.

Mr. Verna makes an interesting point – “The next step for these services will be to broaden their offerings into a user experience that straddles platforms and devices.”

If you’re interested in this, pop over to the eMarketer report, Digital Entertainment Meets Social Media.

What do you think about this? Do you use iPhone to buy things? Or are you waiting (like me) for the prices to come down?

Regards,

Ivan

PS – if you haven’t got enough to do, you can follow me on Twitter @ivanwalsh

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