The compact disc has less than three years left in its reign atop the music industry in Canada, with new data on music sales indicating the download will officially be king by 2011.
Physical music distribution, defined largely by the sale of compact discs, is eroding faster than expected, while online music is growing quickly, says a report published Wednesday by PriceWaterhouseCoopers LLP.
The consulting firm's annual report on the global media and entertainment industry suggests physical music sales in Canada will fall to $275-million (U.S.) in 2011, from about $572-million last year.
By that time, digital sales from sites such as Apple Inc.'s iTunes music store are projected to hit $366-million.
It is expected that at some point in late 2010, the compact disc – which inherited the most-used music format throne from the cassette tapes and vinyl records that came before it – will be surpassed by the digital download.
“The physical distribution [of music] worldwide is declining at a faster rate than we expected,” said Tracey Jennings, a partner at the PricewaterhouseCoopers Canadian office in Toronto.
The ease of Internet downloading and the advent of digital players capable of holding large volumes of songs have driven the growth of digital sales. Should Canada enact proposed copyright legislation that includes penalties for copying music from CDs to digital players, the decline in CD sales would likely be hastened. “If people had to choose … I'm not sure the CDs would win,” Ms. Jennings said.
At $122-million, digital music sales in Canada were less than a quarter of physical music sales in 2007. But physical distribution is expected to decline by an average of 16.2 per cent each year over the next five years, the report said.
The physical distribution market has seen accelerating declines of 11.9 per cent in 2006 and 19.8 per cent in 2007. “It appears that piracy is getting worse, and legitimate digital services are further cutting in to physical spending,” the report says.
The report comes after Apple said in April that its iTunes online music store became the largest retailer of music in the United States, surpassing Wal-Mart Stores Inc. At the same time, many record stores have undergone a drastic makeover, with chains such as HMV and Wal-Mart pulling back on CDs and pushing aggressively into discounted DVDs and video games.
Sales of video and computer games have also been growing faster than expected in Canada, the report said. The gaming market grew 26.5 per cent last year, to $1.3-billion. The pace of growth is expected to moderate over the next five years to an average of 9.2 per cent. By 2012, the market is expected to be worth $2.1-billion.
The overall Canadian entertainment and media market – including television, radio, newspapers, Internet advertising, billboards and theme parks – rose 5.2 per cent in 2007 to $40.7-billion.
The pace of growth was slightly slower than the 8.6-per-cent increase recorded in 2006, when the return of NHL hockey from a lockout boosted advertising spending.
Growth in the Canadian market is expected to average about 5.8 per cent over the next five years, slower than the projected global rate of 6.6 per cent.
“If you look to the North American market as a whole, we are seeing some of the impacts of the economic slowdown,” Ms. Jennings said, noting that “Brazil, Russia, India and China are continuing to grow significantly.”
Newspapers in Canada are projected to grow annually by 1.8 per cent over the next five years, to $3.8-billion in 2012. The television advertising market is expected to expand by 3.6 per cent a year, to $3.4-billion in 2012, while TV subscription revenue will be worth $6-billion by then, up from $4.6-billion last year.
Internet advertising is the fastest-growing segment in Canada, and is expected to rise an average of 21.1 per cent a year to $3.4-billion in 2012.
