Report: Subscriptions to drive digital music industry

People don’t really listen to CDs anymore. Instead, most consumers use iPods and other MP3 players to support their digital music libraries.

A new report by global analyst firm Ovum forecast the digital music industry will grow 15 percent every year through 2017, at which point it will generate more than $22 billion in revenue. A major driver behind this development will be the increased use of subscription services.

“We expect the main driver of digital music in the forecast period to be subscriptions because it is a format that can be easily bundled by service providers, as well as offered directly, resulting in increased penetration of subscriptions around the world,” said Mark Little, a consumer telecoms analyst at Ovum.

The research firm noted that many people are beginning to use subscription music services because the tools give them access to millions of streaming songs for a monthly recurring payment equivalent to the price of a CD. As a result, Ovum forecast the subscription music market to expand at a compound annual growth rate (CAGR) of 46 percent through 2017.

“With Spotify landing in the U.S., joining Rhapsody, Sony Music Unlimited, Rdio and MOG, such brands are helping reinvigorate on-demand subscriptions and we estimate a 40 percent CAGR over the forecast period,” Little said.

As the subscription music industry continues to grow, it will inevitably become more competitive as vendors try to get a piece of the market. By leveraging an effective subscription management platform, service providers may be able to gain a competitive advantage over rival firms by enhancing usage visibility and increasing recurring revenue opportunities.