Yankee Research Predicts Record Label Marginalization

The Yankee Group used CES to share an analysis showing two fundamental shifts are driving the music industry – digitization and direct-to-consumer transactions. As a result, Yankee says, US recording revenue has plummeted 25% or more since peaking at $14.6 billion in 1999.

Over the course of the next several years, Yankee Group anticipates that music industry revenue will begin to stabilize in the US, though at a lower level than previously seen. By the end of 2007, digital music revenue in the US grew to $1.98billion, and will reach $5.34 billion by 2012. However, artists will increasingly keep the lion’s share of this revenue as record labels become marginalized. The report offers solutions:

• Abandon DRM; embrace watermarking: Record labels can’t escape DRM, but by embracing watermarking, they will make it completely transparent to consumers.
• Leverage Anywhere Consumers: Record labels should encourage consumers to become legitimate distribution channels themselves and enable them to profit from it.
• Promote PC, not the phone: Wireless carriers must aggressively push the PC rather than the phone as the digital music distribution channel. The PC dominates music downloads.