Thu January 15, 2004 11:58 AM ET

By Bernhard Warner, European Internet Correspondent
LONDON (Reuters) - A top music executive on Thursday said strong music download sales over Christmas from artists like chart-topping hip-hop Outkast with their hit "Hey Ya!" have set the beleaguered industry up for a promising year.

"The market is exploding, and as more significant retailers join the fray, we expect this market to continue to grow," said Larry Kenswil, president of eLabs, the new business and technology division of the world's largest music label, Universal Music Group .

"And Europe is next. Just about all the players roaring in the U.S. are preparing to come here. There is no reason to think they won't be just as successful here," he said, addressing a gathering of media and technology executives at a conference hosted by the Royal Society for the Encouragement of Arts.

Industry observers say it is far too soon to call a recovery. The $30 billion industry is bracing for a fourth consecutive year of declining sales as they struggle to find a solution for online piracy and win over a consumer base that spends more on DVDs and video games.

Still, the small, but growing demand for music downloads on such online music stores as Apple Computer's iTunes and Roxio's Napster and RealNetworks Liquid Audio offers a rare glimmer of hope for the battered industry.

THE FIRST MEANINGFUL YEAR

Outkast's "Hey Ya!" was the most downloaded song for 2003, with over 110,000 downloads, Kenswil said. The artists, signed to the BMG label Arista, hold the new distinction of topping the virtual and real-world charts.

In the Christmas week, 2.5 million songs were downloaded by U.S. consumers and 30 million songs were downloaded for the full year, said Kenswil, citing data from Nielsen Soundscan, which tracks U.S. music sales.

Last year, Kenswil said, was the first significant year for music downloads. Major industry-backed download services began in previous years, but were largely ignored by consumers as they carried a meager song library and a confusing array of tariffs.

The European market is small, too, as the likes of Britain's OD2 struggle to win over paying consumers from file-sharing networks such as Kazaa and eDonkey. Industry executives believe the likes of iTunes and Napster will arrive in Europe by summer. With an average price of 99 cents per song, the U.S. download market, far and away the world's largest, represents a minute fraction of total sales. But record executives are optimistic the recent success of online music stores in America will catch on in other territories.

"Record companies cannot compete with free, unless we have compelling consumer services," Kenswil said.
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Sometimes I think either these people actually live on another planet, or they are viewing the world through some bizarre kaleidoscope.

"Record companies cannot compete with free, unless we have compelling consumer
services,"...
Thats like asserting that if you have two gas stations across from each other...
one giving gas away for free, and one charging out the wazoo for gas, but giving great window cleaning...they might flock to your station to get that great window washing....

Read the rest of this story
HERE

"The artists, signed to the BMG label Arista, hold the new distinction of topping the virtual and real-world charts. "

Didn't Eminem do the same thing?

"The $30 billion industry is bracing for a fourth consecutive year of declining sales as they struggle to find a solution for online piracy and win over a consumer base that spends more on DVDs and video games."

Hmmm...I think suing more of these people will win them over...yeah, that consumer base will wanna buy more of your crap if you sue the crap out of em....

Are they really having a hard time wondering why sales are declining after you offer people dog crap masquerading as music at a highly inflated price and then go on a crusade of suing and intimidatng customers...are these "geniuses" this RETARDED????????

Business maxims used to include "Give the customer a good quality product at a fair price" and "The customer is always right"...now the RIAA has perverted it into...
"Give the customer a piece of stinking crap at an outrageous price" and
"The customer is always a criminal...sue em all"

and they wonder what's gone wrong...Geeeeeeez

Nothing's going to save them from their own stupidity.

"The market is exploding, and as more significant retailers join the fray, we expect this market to continue to grow,

Exploding?? I didn't hear any boom!! Maybe It was the sound of all those fans shutting the door on their DRM crap

Off Topic: Jack Valenti on MSNBC as well as a former Sony CEO.

The topic was movies appearing online and screeners. I wanted to pass this along to everybody, so here are some of the main points:

-Jack says there are laws in place in 6 states that will lead to the arrest of someone who brings a video camera into a theater. Hopefully in 12 states by the end of this year.

-Former Sony CEO suggests that indies and MPAA movies be on a "level playing field" to "give everyone an equal chance."

-The host asks Valenti his opinion concerning screeners and Valenti declined to comment because he is under a court order not to talk about screeners.

-The topic of "self-destructing" tapes (?) was briefly mentioned. This was categorized as "technologically advancing.. in a good way" by Valenti.

-In response to a question essentially asking how it actually makes a difference to the MPAA (i.e. how does it hurt them), the former Sony CEO says that piracy must be attacked from two sides, aptitude and attitude. In other words: stop people from getting free music, and change their minds that free music is good. "If you get something for free once, it's different. Then you try it again. And by the third time you get it for free it becomes a way of life." So in other words, he didn't answer the question, and the host kissed his ass for it.

-Valenti said that he is working with Universities where "most of this takes place" so that the "kids" know that there are consequences. Essentially - Universities are giving these scoflaws high speed internet connections.

Overall the show made me sick to my stomach. The former Sony CEO suggested a level playing field, but other than that, the host brown nosing Valenti is going to keep me awake all night tonight.

Someone can post this as an article, or find more info if available. Or it can be fine here. Whatever works.

-Valenti said that he is working with Universities where "most of this takes place" so that the "kids" know that there are consequences.

most of this takes place????? What color is the sky in the world you live in Jack??

Hardly surprising that OD2 are struggling in Europe, the difference between "free" and $1 is one thing (still overpriced) but as OD2 are charging $1.50 per song in the UK it's no wonder that they're struggling - and of course if we try and access a US site we get blocked, not exactly fair competition!!

a few questions: wtf is OD2?
how many euros is 99 cents? I'm sure that any company based here has people over in Europe, but if the US will only pay 99 cents for a song, and the conversion is higher, then the companies will try to charge more. Isn't that something like price fixing?
ttmmm

Kenswil's comment about Record companies not being able to compete for free unless they offer compelling service is not totally off-base.

Using P2P to get tunes may be free, but it can be frustrating. Often, the song is not complete, or it is flawed, or the user you are downloading from has to shut down before you get the song, or .......

Now, 99 cents per tune does seem a little steep for guaranteed quality at a single, fast download. But if this price drops, and if the track selections amonst the music download stores continue to increase, then it is entirely possible that many folks will choose iTunes or Napster 2.0 over P2P.

Remye, I think a Euro is worth about a dollar, thankfully we don't have them here so I'm blissfully unaware!

As for OD2 it's the UK's main download system, contracted out and rebadged by various download providers.

The do seem to have altered their business model to allow for discounts for buying a complete CD, when they first started the cost of buying all the tracks on a CD could mean that it was 50% more expensive than buying the "real thing"!!!

Even so, to actively lock the UK out of downloads from the USA and then charge us more for the same thing over here has a very bad smell to it!

Still, the small, but growing demand for music downloads on such online music stores as Apple Computer's iTunes and Roxio's Napster and RealNetworks Liquid Audio offers a rare glimmer of hope for the battered industry.

People, lets be happy about this!!! If they really, really believe it's all going to be ok, then perhaps their is hope that they will simply just leave everyone else alone!

Personally? I think they need to find an excuse to get them out of this mess of not being able to stop p2p, so they have to make it appear that something they are doing is working for them. ~pepe~

"ex-Vice President Dan Quayle still gaining acceptance"...lol..sorry...
it just popped into my head....sorry for getting off topic.

How long before we see our ISP's offering unlimited downloads of quality music, movies and games, for an affordable monthly fee? What is affordable and practical?

This would be ideal, wouldn't it? Or am I dreaming?

Reality check. Your product has only audio. DVDs have video and audio. Video games have gameplay, video, and audio. Your product isn't worth as much as DVDs or video games.

"The $30 billion industry is bracing for a fourth consecutive year of declining sales as they struggle to find a solution for online piracy and win over a consumer base that spends more on DVDs and video games."

Forgot the quote i was referring to