Sony BMG: “We Are Projecting Up To 40% Of US Sales Coming From Digital in 2008”

Authored by Jay Baage on October 4, 2007 - 8:47am.

Digital Music Forum West 2007 - Many of the Thursday morning panels acknowledged the fact that, in this digital age, people are consuming more music than ever. They are just not paying for it. So how do we adjust to that reality? Digital revenues are still not making up for the drop in sales of CDs. Far from it. However, many panelists agreed that the industry is now finally moving in the right way by dropping DRM-restrictions, moving to ad-supported models and variable pricing in order to find individual price-points that works for everyone.

“2007 has been a difficult year”, said Thomas Hesse, President, Global Digital Business & U. S. Sales, Sony BMG Music Entertainment, who was the morning keynote. He mentioned that Sony BMG are at 30% digital sales in the US this year and projecting up to 40% next year. “Unfortunately it is less abroad and it is not enough to make up for the overall decline in sales”, he continued.

David Goldberg, Entrepreneur-in-Residence, Benchmark Capital, suggested that music industry executives have themselves to blame for is not moving fast enough to embrace a digital world.
“People think it is bad this year, it will be catastrophic next year (for the music industry)… Free ad-supported music is the way to go, we should have had that years ago. There is no sense of urgency in the industry on how fast this is tipping over.”

As far as new ideas for monetizing music, prepaid download cards and gift cards can, to some extent, replace physical CDs at retail, especially when combined with free location-specific WiFi downloads like Starbucks and iTunes are going to launch. Other opportunity that were mentioned by many of the morning panelists for the music industry is on the mobile platform and in-games.
“One billion cell phones will be replaced this year and 95% of new cell phones can play music. That is a huge opportunity”, said Dave Jaworski, CEO of Pasalong Networks.

Thomas Hesse projected around 17% of Sony BMG sales coming from digital for this year on a global scale, but mentioned that he thinks that it should be a much bigger business, especially when it comes to mobile offerings.
“We have seen a flattening of growth in the ring-tone business this year, but we see much potential in ring-back tones. It is huge in Korea. Then we have the full track downloads to phone that is another big opportunity. Ultimately, all you can eat music services on the phone and sales of phones preloaded with music I think are the winning formulas”, said Thomas Hesse.

On a positive note, Thomas Hesse said that he sees that the “glass is half-full” and that there are many, many opportunities for the music industry going forwards.
“But we need to make access easier, the offerings more compelling and allowing music to be freely shared on social networks. That is the future”, said Thomas Hesse.

Joakim Baage