Sony BMG's Thomas Hesse: Our Digital Revenues will grow 50-60% in 2006

Authored by Jay Baage on October 4, 2006 - 6:05am.

UPDATED
From Digital Music Forum West 2006. Thomas Hesse, president of Sony BMG Music Entertainment’s Global Digital Business operating group, reveals that he expects digital revenue to be up 50-60% for the full year 2006. He said to DMW that it might even be as high as 70%. On the negative side, he says that physical sales are continuing to go down significantly. Hesse held the keynote address that kicked of DMW’s conference “Digital Music Forum West”, on October 4 and 5 at the BelAge hotel in Los Angeles.

Global digital revenues for Sony BMG grew by over 100 percent lasy year, but then it was growning from a low base.

Hesse says that only 6 percent of US households are using legitimate sites to download music as compared to 11 percent that are using illegitimate sites. He recognizes that this is still a big problem for the industry, but also an opportunity to grow the digital business and make more people convert to legitimare sites.

“We would like to do business with everyone. There are so many opportunities and new business models out there. Paid downloads and subscriptions, free advertising based models. We are going to be very aggressive in this space”, says Hesse.

$1 of every $5 that Sony BMG’s music revenues makes in US are now coming from digital and as much as 1 of 3 dollars in Korea, according to Hesse. Bottom of the list of digital sales per capita is Germany, where only 4% of revenues are coming from digital.

Some individual artists, like Gnarles Barkley, are selling a large percentage of their total sales in digital. Justin Timberlake sold 904.772 downloads of his latest album “Sexy Back” in 5 weeks, according to Hesse.

He also said that handset manufacturers like Sony Ericsson, Nokia, Motorola and LG as well as the carriers are going to make a significant difference for the music Industry going forwards. 2007 will be a year with major digital revenues from the Mobile Platform, more than just ring tones. It will be the year that sideloading music to cell phones will really take off, according to Hesse.

Another intestesting figure is that Sony BMG’s new music video website MusicBox currently up to 16 million streams a month.
“This has really surprised us”, says Hesse.

Thomas Hesse took the job as president of the Global Digital Business operating group at Sony BMG in September, 2004. Hesse leads Sony BMG’s overall business efforts in the area of new technology.

He came under fire from consumer rights advocates for comments that aired on National Public Radio’s morning edition on November 4, 2005. In it, Hesse talked about Sony’s controversial use of a rootkit that acts as spyware and malware, installed when a user listened to a Sony BMG CD on a computer. He said: "Most people, I think, don’t even know what a rootkit is, so why should they care about it?"

This upset a lot of people, because installing a rootkit also makes computers more prone to computer viruses. Sony BMG finally backed down and stopped using rootkits and it hightlights some of the many issues and problem the digital music industry is facing when it comes to Digital Rights Management (DRM).

Hesse did not comment further on Sony BMG’s DRM efforts.