Singapore, February 8, 2001 -A recent research effort from IDC found that although online music downloads are growing in popularity throughout Asia, revenues for online music downloads in Asia (excluding Japan) amounted to less than US$2 million in 2000. Though held back by bandwidth constraints, high prices for labeled digital music and rampant piracy, IDC expects the digital music download market to reach revenues of US$307 million by 2004, given a maturing base of Asian Web users, improving Internet infrastructure, and more sophisticated online music offerings. While the roll-out of broadband Internet access to Asian users is helping, low bandwidth per user remains the greatest impediment to online music downloads. Most users still access the Internet from relatively slow connections. In addition, the wanton piracy of physical format music is another major barrier to converting physical format music users. Asian consumers who buy pirated music often pay less than US$2 for a CD or music cassette.

The environment for online sales of physical format music is currently much more accommodating. In 2000, online sales of physical format music accounted for 94% of total online music revenues, or US$27 million. IDC's survey of 40,000 Asian Internet users that year indicated that music CDs and cassettes were the second most common selling products online in Asia after books. By 2004, online sales of physical format music will account for 59% of total online music sales and generate US$433 million in revenue.

"The physical music format will remain dominant, but digital music downloads will be the fastest growing segment of the market. The Napster revolution has shown that consumers want to develop their own customized digital music libraries," said Jasmine Soo, Senior B2C Analyst, Internet Research. "As the online music industry takes shape, record labels will need to develop innovative strategies to evolve with a rapidly changing market environment."

IDC sees four types of online music sites emerging as the online music industry unfolds: independent music sites, single-label music sites, multiple-label music sites, and multiple-label peer-to-peer networks. A variety of music titles will be a key factor in determining which sites will succeed. Online music sellers that have prohibitive selections are likely to be shunned by surfers looking for their favorite music, regardless of label.

As such, IDC believes that many online music sites need to reconsider their business models to attain success. Some of IDC's recommendations are as follows:

1. Capitalize real estate that provides offline payment fulfillment and broadband access for fast digital music download.
   
2. Harness the email system to increase customer contact and "single-serve" samples of digital music files via click-on hyperlinks on the email.
   
3. Consider the ASP model for licensed digital music.

Figure 1 Online Music Sales (US$Million) in Asia/Pacific ex Japan, 1999-2004

Copyright IDC, 2000. Unauthorized use is strictly forbidden.

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at www.idc.com.
IDC is a division of IDG, the world's leading IT media, research and exposition company.

Register now for IDC's Second Annual IT Forum, the pre-eminent information and communications industry event

The Asia Pacific IT Forum is recognized as the most prestigious information and communication technology conference in Asia. It provides an invaluable opportunity to meet key industry personalities and enables attendees to exchange ideas and discuss important topics with the most influential users and opinion leaders in the IT industry. More than 1000 IT professionals / business leaders attended the event in January 2000 and CEOs/Senior Executives from leading organizations provided the attendees with their vision on the new economy. More than 100 journalists also attended the event and provided a comprehensive coverage in the most important and renowned publications across Asia.

Once again, in February 2001, IDC will be holding a two-day Asia/Pacific IT Forum in Singapore which aims to provide an in-depth analysis on the state of the e-economy in the region. Senior IDC analysts and distinguished speakers from sponsoring companies will address the challenges and opportunities associated with e-commerce in the Asia/Pacific region.

For more information, please contact Nah Li Wee at 65-335-0712 or email lnah@idcap.com.

For more information about the research, please contact Jasmine Soo at (852) 2905-4240 or email jsoo@idcap.com. To purchase IDC's music bulletin, please contact Sharon Yeo at (65) 335-0761 or email syeo@idcap.com.

Jasmine Soo
Senior B2C Analyst, Internet Research
(852) 2905-4240
jsoo@idcap.com

Mike Wong
Manager, Marketing
Phone: 65-335-0731
Email: mwong@idcap.com

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