Digital Music Forum: State of the industry in 2009

Although music enthusiasts are out there online Googling for downloads and information, a lot of musicians still find it tough to connect with fans and to sell their music over the Web, said speakers at the Digital Music Forum here in New York City today.

A big part of the challenge is that those likely to buy music online constitute a small and elusive bunch. "In the US, 50 to 65 percent of people don't buy any music at all," noted David Card, VP and principal analyst at Forrester Research.

Although CD sales are way down these days, they're still far ahead of paid digital downloads, according to Russ Krupnick, VP and senior industry analyst at NPD Group. Two-thirds of those who do buy music purchase CDs only. In comparison, just 5% limit themselves to buying digital downloads only, without shelling out for CDs.

Piracy is a huge concern, said Celia Hirschman, host of KCRW's "On the Beat." Hirschman pointed to estimates by the IFPI music trade association that 95% of all music downloads are unauthorized.

But piracy isn't the only problem, Krupnick contended. "We're not reaching out to consumers," he elaborated. In surveys, consumers are telling NPD Group, "There's nothing new I want to buy," and, "My favorite artists aren't communicating with me."

The music industry has been "really good at knowing what consumers want, but [not] at getting it to them," concurred Ziv Navoth, senior VP of marketing and business development for Bebo/AOL's People Networks.

Paid digital downloads saw fewer new users last year, and the industry is starting to experience "portable player saturation." People need to find methods of "adding value" to digital downloads, Krupnick said.

"But Pandora usage is doubling," the analyst pointed out, in reference to the Internet radio service. "Listening via social networking is jumping, [and so is] anything that's free."

Krupnick also cited research showing that consumers who buy concert tickets and artist-related merchandise such as T-shirts tend to spend more on CDs, too.

The NPD analyst suggesting finding new ways of "intercepting" these users, on Internet radio, the artists' Web sites, social networking sites, and podcasts, for instance.

"You need multimedia messaging," according to Card of Forrester Research. "Traditional radio is still a very powerful voice."

Jeremy Welt, senior VP for New Media at Warner Brothers Records, noted that one of Warner Brothers' clients, a rock group, raised its Web traffic tremendously -- even during the off-tour season -- when it started to use Twitter with fans.

Syd Schwartz, senior VP for digital strategy at EMI North America, said that one of EMI's acts, a hiphopper named Pitbull, managed to garner 700,000 downloads of a single tune produced strictly for the Internet. Marketing methods leaned heavily on radio and word-of-mouth.