Music rental market to outpace ownership model

The market for subscription-based music rental services is estimated to reach $3.3bn by 2012, eclipsing the market for paid-for original recordings, according to industry analysts on Tuesday.

Juniper Research said that mobile subscriptions which offer unlimited music downloads on a rental basis are expected to surge in popularity over the next few years, and will provide the majority of mobile revenues derived from original recordings.

Late last year, Nokia announced its ‘Comes With Music’ platform, that enables consumers to buy a Nokia device with a year of unlimited access to millions of tracks. And Omnifone launched its subscription-based MusicStation platform.

“Music rental services such as those offered by Omnifone are incredibly ‘sticky’, in that once consumers have taken the time and effort to build up an extensive playlist, they will be increasingly reluctant to unsubscribe from that service and from the operator, thereby providing a significant boost to ARPU levels,” said Juniper analyst Windsor Holden.

However, the analyst also expects that as 3G services are rolled out in emerging markets, then full track download sales will mushroom, with the volume of downloads in the Indian sub-continent alone rising from less than 2 million in 2007 to nearly 480 million in 2012.

“India and China represent a tremendous opportunity for the mobile music industry,” said Holden. “Both have experienced quite remarkable levels of ringtone and ring-back tone adoption, and as more full-track services are deployed, then it is likely that the mobile handset will become the most popular personal music player in these and other emerging markets.”

Total revenues from original recordings delivered to the handset – on both a paid for and rental basis – are estimated to increase from $960m in 2007 to $6.1bn in 2012

Interestingly, the analyst firm also predicts that the global market for end-user generated mobile music revenues will rise from $8.9bn in 2007 to nearly $17.6bn in 2012