Digital music doldrums - Who does it affect?

Filed in archive Commentary on June 12, 2006

This article is one in a series examining the Pali Capital report that showed paid music download growth is slowing.

Who does it affect?

The digital slowdown is not good news for the recording industry.

The other part of the current digital music family - mobile, ringtones, paid P2P - capture an inordinate amount of headlines. But they are ancillary revenues with little effect on the overall business equation.

It's bad for music makers. Digital sales have risen to the point that it essentially offset the decline in CD sales in 2005. With digital's heady days behind it, digital will not make up for further hemorrhaging. It certainly is not going to return music to its prior glory days.

This situation is great for Apple. It validates their razor blade strategy and underscores the music business's tantrums that they're losing power, as the real money is in the iPod.

It's bad for online music sellers not named after a fruit. You can ignore competition when the market is exploding. But as a market matures, you only gain market share by taking it from someone else. Branding and integration increasingly become critical to customer acquisition. Hmm, those are exactly Apple's core strengths. It will be difficult to take a bite of Apple without changing the game.