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Jupiter Projects Only $30 Million in Digital Music Distribution

Sales of online music via digital distribution over the Web will only reach $30 million, or 2.2%, of total online music sales ($1.4 billion in the U.S.) by 2002, according to new research from Jupiter Communications in New York.

Still, Jupiter is advising record labels to reverse their traditional aversion to digital distribution and embrace it as a marketing tool, as a means of combating rampant online piracy, as a way to cut out retailers and earn more revenue, and as a less expensive distribution model.

MP3 technology, an encoding and compression format that allows fast and easy downloads of recorded music, is already prevalent on the Web and could thwart the labels' opportunity to make money from digital distribution unless they act now, Jupiter said. If the labels support development of a new encryption technology that offers superior sound and a faster download time, it could help to mitigate their concerns of piracy by surpassing MP3 as a viable technology.

In new research released to clients of its Strategic Planning Services (SPS), Jupiter delineates four stages in order of feasibility for digital distribution rollout, citing special promotions (where a consumer can download a single song before deciding to purchase the entire album), out-of-print records, catalog back lists, and finally new releases as possible products for digital distribution.

Although many big labels are concerned that consumers would be able to download an album and then distribute it at will, Jupiter believes the security solutions and ultimately the benefits of digital distribution assuage such concerns.

Said Mark Mooradian, group director of Consumer Content Strategies at Jupiter Communications: "The longer major labels hold out, the more ground they will lose to pirated copies of their own music and to independent labels, which are generally eager to roll out digital distribution models."