snapshot 8/1/08

The State of the Compact Disc
In the compact disc – the CD – there is cause for concern and some optimism. As they have for most of the decade, U.S. CD sales are dropping and will continue to drop in the coming years. After a surge in store closings and reductions of shelf space, the CD’s rate of decline is expected to slow over the next four years. There is evidence that inventory reductions will not lead to a commensurate decrease in sales. Store closings and consumers’ migration to digital music, however, will continue to harm sales. Wholesale prices will come under greater scrutiny as pressure rises to prolong the CD’s useful life and further justify their place on retail shelves. Coolfer forecasts U.S. CD sales to drop 16% in 2008, 14% in 2009 and 12% in 2010, 20011 and 2012.

In spite of the decline in CD sales, its demise has been exaggerated. In the face of changes in the ways people acquire and listen to music, physical formats continue to be the preferred music vehicle. The format still represents the majority of all recorded music revenues and has a good deal of life left in it. One study found 41% of music buyers purchase only physical formats.


Nokia to make Zune Marketplace phone?
An alleged Microsoft source today claims that Nokia is developing phones that would be compatible with the Zune Marketplace. While the project isn't said to involve custom handset design, Nokia in the suggested plan would integrate its software with content from the Microsoft-run Zune store, which in protected format doesn't currently work outside of Zune portable media players. Whether this would involve direct access to the Zune Marketplace from the phones themselves or sync with PC-based Zune software is unknown.


Sony Pictures: Blu-ray discs to outsell DVDs by 2011
Sony Pictures Home Entertainment vice president for Asia-Pacific Tim Meade on Friday announced market reports that lead him to believe sales of Blu-ray movie discs will outnumber standard DVDs sometime in 2011. Meade went on to say global sales of movies on the two disc formats will be split around 60 percent in favor of the standard-definition DVD format by 2010, with the high-definition media eking out an advantage one year later.

By the end of 2008, Blu-ray movie disc sales will grow to 25 percent, up from 20 percent in mid-2008 and just 9 percent at the end of last year, Meade said. Not only is this due to the fact that the amount of movie titles released on Blu-ray discs keeps growing, but also thanks to the increasing sales of Blu-ray players, which is expected to account for 15 percent of the entire video player market by the end of 2008. Last year, Blu-ray players accounted for nearly 10 percent of the market, and sales in the US and Europe have grown by 400 and 600 percent, respectively, in the first half of 2008.


Can MP3s Save the Music Strategy at RealNetworks?
RealNetworks is now transitioning into an MP3-based catalog on Rhapsody, at least on a-la-carte downloads. But is that enough to save its music strategy? But the MP3s only started flowing after the quarter ended, and the transition towards DRM-free remains ongoing. Now, the question is whether consumers will substantially increase their a-la-carte downloading through Rhapsody, and in turn, migrate upward towards the subscription platform.