The music industry must move away from the retail CD as its primary revenue generator before Christmas 2009, according to a new Gartner study which says the reliance on revenue from the sale of CD's is hindering the music industry from fully embracing online distribution opportunities.
“By propping up the CD business, rather than fully investing in online distribution alternatives, the major labels and the larger music industry have neither succeeded in stamping out piracy nor done much to recreate the business models of the old ‘record business,’” said Mike McGuire, research vice president at Gartner. “Music labels should instead emphasize 'digital first,' making all new releases and catalog issues via digital services and moving CDs to an on-demand publishing mode.”
McGuire is not clear what "online distribution alternatives" record labels are failing to fully invest in. But if it followed his advice and embraced the inevitable digital future today, the music industry would be sidelining a format that still generates 75% of its revenue.
That fact does not deter McGuire. “The industry's comfort with past marketing and promotional practices centered on CD launches is ingrained...
and difficult to give up. But the reality is that digital natives and immigrants are more interested in convenience and choice,” he argues. “This is not to say that the physical CD would disappear altogether. Rather, it could shift to being a promotional tool to be sold or given away at concerts for example.”
As well as the move toward ‘digital first,’ the Gartner study recommends that labels focus on "the limitless ways digital content can be delivered, consumed and monetized" and advocates for the development of comprehensive and flexible licensing to enable innovation.