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| GartnerG2 Says "Big 5" Record Labels Must Standardize Digital Music Delivery To Profit From the Market Opportunity |
| Varying DRM Solutions Stall Industry Progress and Threaten Consumer Confidence in the Future of Digital Music Distribution |
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STAMFORD, CONN., August 29, 2001 —In order for the digital music revolution to become viable, the "Big 5" record labels must agree to a standard platform for digital music distribution, according to a new report from GartnerG2, a research service of Gartner, Inc. (NYSE: IT and ITB). The report, titled "Digital Copyright Law: Protect Content - and Consumers," goes on to say that by 2004, Digital Rights Management (DRM) for music distribution will be standardized.
The report notes that the record industry is in the midst of a controversial debate that is keeping the "Big 5" record labels - Universal, Sony, BMG, EMI and Warner Music - from realizing the profit potential of digital music distribution. As each label struggles to find "the right" DRM solution, they are simultaneously alienating their consumers and stalling the economics of the proposition. Ultimately, consumers will vote with their wallets or they will go elsewhere if they can't get what they want online. "Until there is a de facto standard for DRM, consumers won't line up to buy services," said P.J. McNealy senior analyst for GartnerG2. "Digital distribution needs to be brain-dead simple for consumers, and any DRM solution deployed should work with all music software and hardware. In order for this to happen, the Big 5 need to work together, and that doesn't look hopeful before 2002." In June of this year, GartnerG2 performed a survey studying the music listening habits of 156 million U.S. adult Internet users. The survey found that nearly 50 percent of those polled listened to CDs on their PCs; whereas only 25 percent listen to music downloads from the Internet on their PCs. In the same GarterG2 survey, it was reported that only 6 percent of the same demographic purchased digital music downloads in the last 3 months. These numbers point to the fact that consumers still have not accepted purchasing and downloading music via the Internet. Once standards for digital delivery are adopted, GartnerG2 sees three primary risk areas for strategic managers, business development executives and other growth-oriented personnel:
"What happens with the music industry's adoption of DRM technologies will serve as a leading indicator for other types of content such as movies, video games, and print," said Mike McGuire, research director for GartnerG2. "More importantly, is that DRM implementations for each will have an enormous impact in getting consumers to shift from buying products -- CDs, tapes, and books -- to buying these content types as services -- be they subscriptions or pay-per-download." GartnerG2 is a new research service from Gartner that helps business strategists guide and grow their businesses. For more information on the report visit www.gartnerg2.com. About Gartner, Inc. Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients understand technology and drive business growth. Gartner's divisions are Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and consists of 4,600 associates, including 1,400 research analysts and consultants, in more than 80 locations worldwide. The company achieved fiscal 2000 revenues of $859 million. For more information, visit www.gartner.com. |
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Contact: Mike McCabe Middleberg Euro 212-699-2752 mikem@middleberg.com |
Contact: Danielle Westling 203-316-6754 danielle.westling@gartner.com |
