|
Gartner Says Record Industry Must Implement Digital Distribution Model to Support Single-Track Purchases
|
|
San Jose, Calif., August 17, 2000 — While the music industry continues its court battle with Napster, record executives must quickly embrace a new digital distribution model that supports single-track purchases to succeed in the ever-changing Internet market, according to Gartner Group, Inc. (NYSE: IT and ITB).
|
|
The record companies must have a model that utilizes effective Digital Rights Management (DRM), and they should form their own music portals, or sign distribution licenses with as many Internet music distributors as possible. In this scenario, Gartner analysts said the consumers could go to a site and sample music off a new or old CD and decide on a track-by-track basis if they want to purchase. The portal can have a signed licensing agreement with the music labels and/or individual groups and artists to be able to distribute their individual tracks.
|
|
"Digital distribution models will morph through several iterations. The cog behind each of the models is the content keepers — the record labels," said P.J. McNealy, senior industry analyst for Gartner's e-Business Services group. "With technological developments, such as MP3 file formats, consumers are becoming more familiar with digital music formats and 'ripping' CDs. Many of these consumers don't want a full album but instead are looking for three to four tracks from a CD.
|
|
"For a record label to recoup the same amount of money as it would if a consumer purchased a full CD, the labels would need to charge around $4 to $5 per track, but we think that's too high. We think consumers may be willing to spend between $0.99 to $1.99 per track, so the labels will need to find alternative revenue opportunities."
|
|
Another model the record labels could consider would be an inverse of the traditional model where someone buys a hardcopy CD and then rips the CD into digital format. In this situation, the consumer can buy the full digital download first and then receives a hardcopy in a jewel case as well. The portal would have a signed licensing agreement with the music labels and/or individual groups and artists to be able to distribute the CD. The service would have two prices: one for just the digital download of the songs and another price to receive the CD as well. Because many consumers listen to MP3 files on their computer and/or handheld devices, they may be willing to pay extra to have a CD for their other electronic devices.
|
|
"It will be up to the record labels to counterbalance their needs with the demands of the consumers and then to distribute their content through effective Internet channels," Mr. McNealy said. "If a Napster-like or peer-to-peer solution with DRM were offered, it would be palatable to all content owners and a likely legal solution."
|
|
Additional analysis is available in the Market Analysis Perspective titled "Digital Music Distribution: Which Model(s) Will Succeed?" This Perspective addresses what are the critical success factors for digital music distribution models moving forward.
|
|
This Market Analysis is available to subscribers of Gartner's e-Business Services. These programs are part of a wide range of Gartner services examining the e-business industry. These programs are designed to help senior executives, strategic planners and investors capitalize on emerging opportunities by providing research and analysis on electronic commerce and Internet marketplaces. Additional information on these programs is available on Gartner's Web site at e-Business Focus Area. To purchase the report or subscribe to these services, please call 800-419-DATA or 408-468-8009.
|
|
Additional analysis on the outlook for the e-business industry will be provided during Gartner's Symposium/ITxpo 2000, October 16-20 in Lake Buena Vista, Florida. This event is the IT industry's largest and most strategic conference providing business leaders with a look at the future of IT. Some of the speakers at this year's event include Hewlett-Packard's chairman and CEO, Carly Fiorina; Sun Microsystems' chairman and CEO, Scott McNealy; and Microsoft's president and CEO, Steve Ballmer. To register for Gartner's Symposium/ITxpo 2000, please call 1-800-778-1997 or 1-203-316-6757, or go to Gartner Symposium. Members of the media can register by contacting Lisette Kwong at 1-212-320-2330 or lkwong@tsicomm.com.
|
About Gartner
Gartner provides unrivaled thought leadership for more than 10,000 organizations, helping clients to achieve their business objectives through the intelligent and efficient use of technology. Additionally, Gartner helps technology companies identify and maximize technology market opportunities. Gartner's technology content and strong brand reach IT professionals globally through Gartner Research, its research and advisory unit, Gartner Services, its custom consulting unit; Gartner Events, including Gartner's renowned Symposia; and, at www.gartner.com.
Gartner subsidiary TechRepublic, Inc. (www.techrepublic.com)
is the leading online destination developed exclusively for IT professionals by IT professionals. Gartner, founded in 1979 and headquartered in Stamford, Connecticut, achieved fiscal 1999 revenues of $734 million. Gartner's 3,600 associates, including 1,200 research analysts and consultants, are in more than 80 locations worldwide. For more information about Gartner's industry-leading products and services, please visit us on the Web at www.gartner.com.
|
|
CONTACT:
|
|
|
|
