Forrester: Digital Music To Surpass CD Sales By 2012

CAMBRIDGE, Mass.--(Business Wire)--
Half of all music sold in the US will be digital in 2011 and sales
of digitally downloaded music will surpass physical CD sales in 2012,
according to a new report by Forrester Research, Inc. (Nasdaq: FORR).
Digital music sales will grow at a compound annual growth rate of 23
percent over the next five years, reaching $4.8 billion in revenue by
2012, but will fail to make up for the continuing steady decline in CD
sales. In 2012, CD sales will be reduced to just $3.8 billion.

"This is the end of the music industry as we know it," said
Forrester Research Vice President and Principal Analyst James L.
McQuivey. "Media executives eager to stay afloat in this receding tide
must clear the path of discovery and purchase, but only hardware and
software providers can ultimately make listening to music as easy as
turning on the radio."

The Forrester report is based in part on a survey of more than
5,000 consumers in the US and Canada. Among the drivers of Forrester's
five-year forecast for music sales:

-- MP3 player adoption. The average MP3 player is only 57 percent
full, suggesting that the devices are underutilized, while
more of the devices are being bought by households with more
than one MP3 player. Moving forward, a majority of MP3 players
will be sold to households that already have one.

-- DRM-free music. With the four big music labels now committed
to eliminating digital rights management (DRM), DRM-free music
will extend beyond pioneer Amazon.com to Apple iTunes and the
other major online music sites.

-- Social networks. DRM-free music enables every profile page on
MySpace.com or Facebook to immediately become a music store
where friends sell friends their favorite tracks.

Forrester believes digital downloads are the logistical mass
market for the future, satisfying all the needs that people have when
it comes to music -- easy to find, easy to buy, and easy to listen to,
regardless of the device. On the other hand, subscription music
services will show modest growth, reaching just $459 million in
revenue in 2012 according to Forrester's projections, while
experiments in ad-supported downloads will be silenced by the powerful
combination of DRM-free music and on-demand music streaming on sites
like imeem.com.

"The industry has to redefine what its product is," said McQuivey.
"Music executives have spent years tracking CD sales. But the artist
is the product -- not just the source of it. New forms of revenue will
come from unexpected sources. For example, the industry has failed to
capitalize on the growing popularity of video games such as Guitar
Hero and Rock Band. In a market where musicians are happy to sell a
million copies of a CD, a video game market where titles can sell five
million copies is enough to motivate even the most depressed music
executive."

"The End Of The Music Industry As We Know It" is currently
available to Forrester RoleView(TM) clients and can also be purchased
directly at http://www.forrester.com/go?docid=43759.

About Forrester Research

Forrester Research, Inc. (Nasdaq: FORR) is an independent
technology and market research company that provides pragmatic and
forward-thinking advice to global leaders in business and technology.
For more than 24 years, Forrester has been making leaders successful
every day through its proprietary research, consulting, events, and
peer-to-peer executive programs. For more information, visit
www.forrester.com .

(C) 2008, Forrester Research, Inc. All rights reserved. Forrester
is a trademark of Forrester Research, Inc.

Forrester Research, Inc.
Tracy Sullivan, +1 617-613-6023
Senior Public Relations Specialist
press@forrester.com

Copyright Business Wire 2008