Will 2008 be the last big Christmas for CDs? Analysts Gartner think so, saying the music industry must away from its dependence on revenues from CDs and invest in online distribution networks.
"Music labels should instead emphasise 'digital first,' making all new releases and catalogue issues via digital services and moving CDs to an on-demand publishing mode," said Mike McGuire, research vice president at Gartner.
"By propping up the CD business, rather than fully investing in online distribution alternatives, the major labels and the larger music industry have neither succeeded in stamping out piracy nor done much to recreate the business models of the old 'record business."
78 RPM. Photograph: takomabibelot/Flickr/Some rights reserved
Digital first is, of course, exactly what X Factor winner Alexandra Burke did in the past week. Gartner says that last year, online distribution accounted for 23% of music industry revenue in the US while CD revenues have fallen from 91% in 2005 to 77% last year - reflecting the a rapid drop off since 2000.
What the industry should be focusing on is that 77% of US households, or 96 million consumers, will have broadband connections by 2012. Gartner thinks that record labels should be pushing 'burn-on-demand', thereby relieveing themselves of the significant cost of physical CD distribution. Exploiting additional online content, including lyrsics, videos and news, opens more potential for labels - and it needs to move away from focsuing on marketing and promting physical CDs.
"The reality is that digital natives and immigrants are more interested in convenience and choice," said McGuire. "This is not to say that the physical CD would disappear altogether. Rather, it could shift to being a promotional tool to be sold or given away at concerts for example."
