The recent federal takedown of notorious file-sharing service Megaupload was initially seen as a huge victory for owners of copyrighted music and movies, but new research shows this may not be the case. Federal prosecutors successfully shuttered the service last month and arrested seven men associated with Megaupload including site founder Kim Dotcom, who is said to have earned $42 million from the site in 2010 alone. What was initially thought to be a victory for movie studios and record labels is turning out to be an empty win, however, as Megaupload’s closure has had almost no impact on file-sharing. Read on for more.

Internet consulting firm DeepField Networks analyzed Web traffic from six companies that provide the storage facilities responsible for roughly 80% of all file-sharing traffic. According to the firm, Megaupload’s files accounted for a huge portion of that traffic before a series of raids took the service offline last month; between 30% and 40% of all file-sharing downloads came from Megaupload.

The service moved so much data that global Internet traffic immediately decreased by between 2% and 3% when Megaupload’s services were taken offline on January 18th.

As big as Megaupload was, however, the service’s closure has not had the effect on file-sharing that copyright owners might have hoped. According to DeepField, Web traffic related to file-sharing recovered almost immediately as users simply utilized other services such as Rapidshare and Mediafire.

To compound matters, it looks like Internet Service Providers in the United States will likely take the biggest hit following Megaupload’s closure. ”Instead of terabytes of North America Megaupload traffic going to U.S. servers, most file sharing traffic now comes from Europe over far more expensive transatlantic links,” DeepField noted.

Last year a number of leaks and photos suggested that Apple had a redesigned iPod nano with an integrated camera in the works. The new device wasn’t released last time Apple refreshed its iPod family, but now another round of pictures has surfaced that lends credence to the possibility that such a device may launch in the near future. The images show a camera-equipped iPod nano complete with its signature clip design, and the device appears to be the same size as the current-generation iPod nano. It remains unclear if Apple will ever release an iPod nano with a camera but the source, Apple.pro, has published early details surrounding Apple hardware in the past that ended up panning out. Another report published Wednesday by MIC Gadget suggests that the device pictured is actually a prototype from several months ago that did not pass Apple’s tests. The site says some problems have been ironed out however, and that the new nano could become available in the coming months. Several additional pictures follow after the break.

[Via MacRumors]

Read [Apple.pro] Read [MIC Gadget]

Spotify said Thursday that it now serves more than 3 million active paid subscribers per month, up from the 2.5 million subscribers it was serving in November. More than 20% of its active users pay for premium monthly access, the Financial Times said, which allows users to listen to an unlimited songs without ads or use Spotify on a smartphone. “We have achieved some pretty great results in terms of the ratio of paid users,” Spotify’s chief content officer and US managing director, Ken Parks said in an interview with the Financial Times. “We have an enormous internal effort to drive conversion and engagement with the service. We are very focused on growing in our existing 12 markets as well as expanding in other markets.” Parks also said that the company’s free-trial offer has helped convert users to paid accounts more rapidly. Spotify recently introduced “apps” for its service, which allows anyone, such as Rolling Stone or Billboard, to create playlists or add custom features.

Read

Federal prosecutors in Virginia have shut down notorious file-sharing site Megaupload.com and charged the service’s founders with violating piracy laws. The Associated Press broke the story on Thursday, reporting that the indictment accuses Megaupload.com’s owner with costing copyright holders including record labels and movie studios more than $500 million in lost revenue. Seven people tied to Megaupload.com have been charged and four are already in custody, including the site’s founder Kim Dotcom. Dotcom earned $42 million from the the site in 2010 according to the indictment. Megaupload.com allowed users to upload and share content without any measures in place to ensure files being hosted on the site’s servers were not protected by copyright. The company claims that it responded to copyright complaints as they were received. According to court documents made available on Thursday, Megaupload.com was at one point the 13th most trafficked website in the world.

Read

Album sales in the United States jumped 3% during 2011 according to one report. That may seem like minor growth, but it is actually the first time album sales have increased since 2004. Nielsen SoundScan said Adele’s album “21″ sold 5.8 million copies, and total sales came in at 458 million albums for the year. Make no mistake, however, CD sales are still on the decline. Sales of full digital albums climbed 20% to 103 million units but CD sales dropped 6% to 225 million units. Nielsen’s senior vice president of analytics Dave Bakula said the addition of Google’s music store in the Android Market also helped serve as a catalyst for digital music sales growth. ”It shows there’s still a lot of growth potential in digital,” Bakula said. “That’s something I don’t see falling down.”

Read

Apple on Monday released the 2012 edition of its “12 Days of Christmas” application for iOS devices. From December 26th through January 6th, Apple is giving away free iTunes content including songs, music videos, apps and books to iOS device owners. New content is accessible through the app each day and free downloads will expire after 24 hours. Monday kicks things off with several Coldplay songs and videos, which can be downloaded for free until new downloads are made available on Tuesday. Apple’s 12 Days of Christmas app is compatible with the iPhone 4S, iPhone 4, iPhone 3GS, iPad 2 and iPad as well as the third and fourth-generation iPod touch devices, so users of older iOS device models are out of luck this holiday season. The app is currently available in the U.K. with U.S. availability expected at a later point in time.

Read [iTunes link]

Rhapsody announced on Thursday that it now has more than 1 million paying subscribers in the United States. The company claims it is now the top pay-for music streaming company in the country, although we imagine Spotify is nipping at its heals now that it has more than 2.5 million subscribers globally. In celebration of the milestone, Rhapsody president Jon Irwin shaved his head, a promise he made to the company if it ever reached million subscribers. “We’ve accomplished quite a bit over the past decade, so it’s no small statement to say that 2011 was probably our biggest year yet,” Irwin said. It is quite a big achievement; one might have assumed Rhapsody’s user base would have declined with the influx of other pay-for music services such as Spotify, Slacker, Pandora, Rdio and others. ”The next frontiers for subscription music are the living room and the car,” Irwin said. “Consumers will be able to enjoy Rhapsody from even more connected audio and video systems, as well as other platforms and distribution channels—at home, in the car and everywhere in-between, domestically and abroad.” Rhapsody’s full press release follows after the break.

Spotify announced on Wednesday that its BlackBerry client is now out of beta and officially available for download. Spotify is a free ad-supported desktop music service that allows its users to listen to any song they want, provided it has been licensed by Spotify. Users who want to take advantage of the service’s mobile features, which include offline caching and access to the full Spotify library, must pay a $10 monthly subscription fee. We’re fans of Spotify here at BGR so we highly recommend BlackBerry users give it a try. The download is free (remember, you’ll need a monthly plan to use it, though) and accessible from the BlackBerry App World now. The catch? You’ll need to own one of five BlackBerry models (BlackBerry Bold 9780, Bold 9700, Curve 9300, Bold 9000 or Curve 8520) in order to use the app, which means it looks like CDMA users are being left out in the cold for now.

Read

Spotify on Friday unveiled Spotify Radio, a new service similar to Pandora that will roll out as an extension to the company’s desktop client. The service allows users to create artist-based stations that will stream an unlimited amount of music similar to the artist selected. Spotify Radio users can also skip an unlimited number of songs and save tracks as they play for on-demand listening later as well. The app and associated service are a welcome addition to Spotify, which has had very limited discovery features until now. The free Spotify Radio app is currently available as a preview and it is expected to land in Spotify’s app catalog within the next few days. Spotify has not indicated whether or not its new radio service will make its way to the company’s mobile apps.

Read

Spotify’s New York City press conference just wrapped up and we spent some time checking out several of the popular music service’s new apps. There’s a new section on the left sidebar that lets you quickly access applications from LastFM, Rolling Stone, The Guardian and more. Rolling Stone and other publications will release playlists, some as frequently as each day, with bands the publications think Spotify users should take note of. The applications are seamless and are so tightly integrated with Spotify that they launch almost immediately. If you’re playing a song with tunewiki for example, simply tap the tunewiki application on the left sidebar and it immediately begins displaying song lyrics inside the software. We’re fans of Spotify here at BGR and we’re definitely looking forward to checking these features out a bit more when the app service officially goes live. Apps will be accessible to all users, whether they subscribe to Spotify’s premium services or not, and the beta should be made available today on Spotify’s website around 2:00 p.m. EST. Be sure to check out our full gallery below, and hit the break for a video from Spotify.

We’re live from Spotify’s New York City press conference where CEO and founder Daniel Ek took the stage to announce several new Spotify features, most notably applications. Ek confirmed that Spotify will launch a “truly integrated” application platform inside Spotify that will be “tailored to you and your user tastes.” Third party developers can easily build HTML5 apps using a simple API. The first generation of applications will be featured within the “Spotify platform.” Read on for more.

Examples of the capabilities apps might feature include the ability to automatically find song lyrics from a track that is currently playing, or the ability to find upcoming concert dates and locations without ever leaving Spotify. The company has partnered with Rolling Stone, Pitchfork, Billboard and more for additional applications. Rolling Stone, for example, will help users find new music and albums from staff recommendations and even essential daily playlists.

The application platform is just one way Spotify is adding an edge to its software in an effort to compete with services from Apple, Rhapsody, Google and Amazon. Spotify first launched in the United States in June and Ek said his company is adding more than 20,000 new tracks every day. It now has more than 10 million active users, 2.5 million of which are subscribers to its pay-for services. It’s so popular, in fact, that Ek said piracy has decreased by 25% since Spotify launched.

Spotify’s press release follows below.

Spotify: A Perfect Platform for Apps

Spotify, the largest and fastest-growing music service of its kind, today opens up a new world of possibilities with Spotify Platform.

Spotify Platform gives third party developers the opportunity to build innovative, engaging music-based apps. To us, it’s the next big step in musical enjoyment.

These free apps integrate beautifully with Spotify, both visually and functionally, and can be accessed and shared by millions of Spotify users through the new App Finder, launching today as a preview at www.spotify.com/us/download/previews/

The first generation of Spotify Apps features 16 partner apps, with 12 available from launch today. We’ve been lucky to partner with some of the brightest and best brands in the world to create engaging, fun, and social apps.

The 13 global partners launching on the Spotify App Finder include Billboard, Fuse, The Guardian, Last.fm, Moodagent, Pitchfork, Rolling Stone, Songkick, Soundrop, TuneWiki and We Are Hunted, with Top10 and ShareMyPlaylists apps coming soon. We also have three Nordic partners launching local apps, including Tunigo in Sweden which launches today, Gaffa in Denmark and Dagbladet in Norway, which will be launching local Nordic apps soon.

Our integration with Facebook in September has made more people than ever excited about sharing music again, adding more than 7 million new Spotify users in just over two months. And our users have now created more than 500 million playlists, a number which has doubled since just July.

With Spotify Platform, we want to enable innovation on top of music and add many more layers of music enjoyment. We want DJs to create the best lists, and virtual clubs where people can gather together to hear them, dance, and sing along. We want fans to get closer to their favorite artists, and give great editorial partners and tastemakers a way to recommend music to you.

It’s also what Spotify users have been asking for. Now anyone can enjoy great music reviews, buy tickets for gigs, sing along with the lyrics, all inside Spotify. In addition, you can curate the apps you want and make Spotify yours… and the launch apps are just the beginning.

Music is many things to many people. With Spotify Platform and a whole bunch of clever apps, we hope we can all get more out of music than ever before.

Speaking at the conference, Spotify CEO and Founder Daniel Ek commented:

“Once you take a look, you’ll see why we believe this is truly the beginning of something game-changing for digital music. We think this will lead to integrations that keep Spotify beautiful and simple, but layer in great musical experiences designed to be social and fun. It’s what our users have been asking us for.”

Spotify Platform beta goes live later today as a preview, at:  www.spotify.com/us/download/previews/. For more information about the apps please visit www.spotify.com/apps. The full consumer rollout will take place later in December.

Spotify on Wednesday announced that it now has 2.5 million subscribers around the world paying for its service. The company has roughly 10 million paid and free listeners combined. Spotify’s recent launch in the U.S. is seen as having been a big boost for the company, and its Facebook integration is said to have bolstered new subscriptions as well. The company offers an on-demand music service that allows users to stream to unlimited ad-supported music to computers for free. Ads can be eliminated for a $4.99 monthly fee, and Spotify can be streamed to mobile devices as well for an addition $5 each month.

Read

Amazon has been a leader in the eBook reader space since it first introduced the Kindle eReader in November 2007. At that point in time, the Kindle had a 6-inch E Ink display that supported just four shades of gray, it included 250MB of storage that could accommodate about 200 eBooks, and it retailed for $399. For the first six months or so, Amazon couldn’t keep the device in stock — it was a smash hit.

Since then, Kindles have gotten thinner and lighter, and the current-generation model features a dramatically improved E Ink Pearl display and 2GB of storage. Amazon’s Kindle can now be had for as little as $79. A second model with a touchscreen display and twice the memory starts at just $99, and its battery lasts for up to two months on a single charge. Amazon doesn’t share sales volumes of its Kindle devices but the company is widely believed to be among the top eReader vendors in the world as it teeters between the No.1 and No.2 spots alongside Barnes & Noble.

But eReaders will only take Amazon so far.

Amazon has been a leader in the online retail space for quite some time, and its line of Kindle eReaders represents its first foray into the hardware game. EBooks are big business for Amazon, but its more recent service additions have also been gaining traction. With new options for purchasing and streaming music and movies, customers had to rely on third party devices — computers, connected TVs, set top boxes and smartphones — to consume this new wave of Amazon content. But why not make it all available on a single Amazon-branded device that picks up where the Kindle left off?

The tablet market posed an amazing opportunity for Amazon. I can’t even recall the last time a market segment saw so much hype and so few success stories, and Amazon identified an opportunity to succeed where others were failing. Instead of building hardware that merely acted as a platter on which to serve the same software countless other vendors were unsuccessfully banking on, Amazon would build an end-to-end experience that covered hardware, software and content. After all, the only other vendor whose tablet offering addresses all three of these crucial areas of the user experience seems to be doing pretty well in the tablet space it redefined in early 2010.

Instead of setting out to build an iPad killer, Amazon set out to build a Kindle Fire.

The term “iPad killer” seems to describe any tablet launched by a popular vendor that cannot draw traffic to a news site unless said site includes a mention of Apple’s iPad in the headlines of stories written about said tablet. That’s really the only discernable link I’ve found between all of the slates that have been deemed iPad killers thus far. Another attribute most of them share, unfortunate though it may be, is that they don’t sell particularly well. There have been a few notable exceptions but in general, it seems these tablets are not well received by consumers or by enterprise customers.

If an iPad killer is a tablet that doesn’t grab people’s attention and often doesn’t sell particularly well, then the Kindle Fire is most certainly not an iPad killer.

Leading up to Amazon’s Kindle Fire, media tablets had for the most part been ill-conceived devices that were seemingly rushed out the door in an effort to capitalize on the hype surrounding the iPad. This strategy is not uncommon in business but in this particular case, companies forgot a key ingredient that drives competition: differentiation. With high price points, similar hardware and lackluster first-generation software (Honeycomb was Google’s first attempt at a tablet OS), the bulk of the iPad’s competition had very little to offer the common consumer that might distinguish it from the iPad in a positive way.

The Kindle Fire is a different beast.

Amazon attacked the tablet market on two fronts. First, it offered differentiation. Google’s Android operating system powers the Fire, but one wouldn’t know it to look at the device. Amazon used the open source Android OS as the framework on which it built its own unique user experience. It will continue its own development of the platform independent of Google’s future builds, and it maintains its own ecosystem outside of Google’s. Amazon has its own app store and its own suite of services.

The other piece to the Kindle Fire puzzle is pricing. At $199, Amazon’s tablet is $300 cheaper than the entry-level iPad and $630 less expensive than the 64GB model with embedded 3G. This was a very smart move by Amazon. The company will release more expensive models in the future — BGR exclusively reported preliminary details surrounding a 10-inch model due to be released next year — but Amazon’s first effort hits an amazing price point that creates a new space in the tablet market. It doesn’t compete with the iPad any more than a 32-inch flat panel Vizio TV competes with a 60-inch Samsung model. It’s a completely different animal.

I have read a number of Kindle Fire reviews — and there were plenty to choose from — that went to great lengths to compare Amazon’s tablet to the iPad. While these comparisons sometimes made for compelling reads and even more compelling headlines, they were not very useful. These devices are both tablets, yes, but to liken one to the other is as useful as likening a Mercedes S Class to a Hyundai Sonata. Both vehicles will get you from A to B, but in reality they serve very different purposes.

The S Class is designed to attract a certain type of customer. It offers utility, luxury and a driving experience that is the result of decades of evolution and many tens of millions of dollars in research and development. The S Class is designed to be seen. It outclasses and outperforms much of the competition, but it is about form as much as it is function. It is also assembled from high-end parts and materials, and it carries a relatively steep price tag to match. You see hundreds of them everywhere you go in metropolitan areas, but unless you have expendable income to throw around, you probably won’t buy one yourself.

The Sonata is designed to make a well-styled, capable sedan accessible to the masses. It looks more refined and performs better than other cars in its price range, and it also offers standard features that competing models do not. Even still, it doesn’t pretend to be an S Class and it most certainly doesn’t set out to kill the S Class.

The Sonata’s body isn’t quite as sleek and sophisticated as the Mercedes sedan, and it doesn’t come with nearly as many standard features. Its interior is also much more modest, forgoing supple leather and expensive woods in favor of more pedestrian materials. It won’t accelerate as quickly, it won’t corner as surely and it probably won’t turn any heads. It is a phenomenal value, however, and it touts a build quality and features that are anything but common on such an affordable car.

After using the device for about a week and a half now, I believe Amazon’s Kindle Fire will succeed where others have failed. The hardware is good but not great. The soft-touch materials are comfortable in the hand but the 4,400 mAh battery that hides within the device makes it a bit too heavy for prolonged reading without resting the tablet on a table or leg. The software is good but not great. It has a nice, simple interface that a wide range of users will be able to navigate easily, but it is not refined. The performance is good but not great. Many functions are fluid, as is game play and video playback, but there are often of hiccups and stutters while opening certain apps and performing other functions.

What did you expect? It’s a Sonata.

At $200, the Kindle Fire is a fantastic buy. It is intuitive and capable, and the integration with Amazon services is well-done. The home screen is divided into four sections: first is a status pane across the top that displays notifications, the time, Wi-Fi status and battery charge, and it provides access to settings. A menu section follows beneath, allowing users to navigation between different core features such as the book reader, music player, apps menu and video player. Next is a large area that lists all recent apps and books in a cover flow-like stream. Finally, there is a favorites section near the bottom where users can pin their most frequently accessed apps and books.

Each integrated app — Books, Music, Video and so on — is split into two sections that can be toggled at the top of the screen. The first is “Cloud,” which displays a list of icons on the shelves beneath it that represent all of the user’s content stored on Amazon’s servers. The second is “Device,” which lists locally stored content. There is also a link to Amazon’s store in the top right corner of each page. While it is all too easy to spend money on the Kindle Fire, I love how well Amazon’s services are integrated into each app.

While on the front page of the Books app, a single tap on an icon opens the book of my choice while a tap on the always-visible store link lets me search, browse and purchase books with ease. The Music app lists all of my content available for playback, and then another Store link takes me to Amazon’s music shop where I can purchase albums or individual tracks. The Video app offers a similar experience, but it also offers integration with Amazon Prime video streaming, Amazon’s Netflix-like service that provides unlimited access to streaming movies and TV shows. Don’t expect to find many new blockbuster movies in there, but the catalog is deep enough to provide a decent range of content.

Amazon’s apps page adheres to the same intuitive format. Apps are organized across wood shelves and a link to the Amazon Appstore can be found in the top right corner. Users won’t have access to all of the content found in Google’s Android Marketplace, but that isn’t necessarily a bad thing. Like Apple’s iOS App Store, the Marketplace is packed with garbage. Amazon’s curated approach is appreciated and there is more than enough great content available. I also love that Amazon offers one new paid app for free each day. It makes checking the app store on a daily basis habitual, thus encouraging browsing and ultimately benefiting developers.

The web browser is another bright spot for the Kindle Fire. Amazon’s Silk browser is impressively quick thanks to technology that offloads much of the grunt work to remote servers. Heavy pages seem to take a moment to begin loading as a result, but once the cloud-based portion begins pushing content to the tablet, I find pages load faster than they do on other comparable devices.

The Kindle Fire is not an iPad killer. It doesn’t kill anything, in fact. What it does, however, is offer users a solid experience and a comprehensive catalog of services that make it easy to access existing content and to find new content. It is very, very easy to use, which is something that cannot be said of some other tablets. A young child will be flying around the UI in no time, and his or her grandparents likely won’t take long to figure it out either. Operation is relatively smooth for the most part, but prospective buyers should expect the occasional hiccup from first-generation software running on $200 hardware. Every computer, smartphone and tablet on the planet stutters from time to time, so this is hardly a big deal.

Amazon took its time with the Kindle Fire and it shows. There is plenty of room for improvement, but this first-generation tablet is an intuitive, functional tablet that is as cohesive as it is affordable. It was built as a gateway into the many web-based services Amazon now offers and it succeeds in its mission. It might not kill any Apple products on its way to your door, but I’m sure the media will find plenty more Apple killers in the new year to draw your clicks. In the meantime, the Kindle Fire is a clear winner that will likely find itself atop Amazon’s list of best-sellers for quite some time.

Spotify announced on Monday that it will hold a press conference on November 30th in New York City during which the company’s CEO Daniel Ek, and “special guests,” will discuss “what’s next” for the company. It’s entirely unclear what the event might cover, given the service only recently launched this summer in the United States. It is possible the Spotify will announce an iPad application, although that might be too minor an event to warrant a press conference. Perhaps the company will introduce a music store to go head-to-head with iTunes and Google Music, but we haven’t heard any rumors suggesting that might be a possibility.

More money is being spent purchasing music online than ever before according to a new report from Gartner. The firm’s data suggests that consumer spending on online music will reach $6.3 billion this year, up from $5.9 billion in 2010. “As consumers opt for connected devices — media tablets, smartphones and connected media players — across world regions, their desire for access to and consumption of music and content is growing as well,” Gartner research vice president Mike McGuire said. “The primary stakeholders in the music industry are facing wrenching changes and a somewhat uncertain future. However, the next four to five years portend solid growth.” Read on for more.

Subscription services will account for $532.1 million in end-user spending this year, and that figure is expected to grow to $808 million next year, no doubt spurred by the recent introduction of services such as Spotify, MOG and Rdio. A projected $3.62 billion will be spent on downloaded music and $2.17 million will be spent on “personalization services” this year.

Gartner said that growth rates are slowing in the United States, Western Europe, Asia/Pacific and Japan as the technology matures. The highest growth rates will occur in the Middle East, Africa and Latin America. “For music labels, artists and publishers, challenges abound,” McGuire said. “However, there remain real opportunities to reinvent the business based on consumers who are adopting connected devices and who are showing they will pay for content in multiple ways.” The full press release from Gartner follows below.

Gartner Says Worldwide Online Music Revenue from End-User Spending Is on Pace to Total $6.3 Billion in 2011

Online Music Subscription Services Will be Main Growth Sector in Evolving Market

STAMFORD, Conn., November 8, 2011—

Worldwide online music revenue from end-user spending is on pace to total $6.3 billion in 2011, up from $5.9 billion in 2010, according to Gartner, Inc. Online music revenue is forecast to reach $6.8 billion in 2012, and grow to $7.7 billion in 2015. By comparison, consumer spending on physical music (CDs and LPs) is expected to slide from approximately $15 billion in 2010 to about $10 billion in 2015.

“As consumers opt for connected devices — media tablets, smartphones and connected media players — across world regions, their desire for access to and consumption of music and content is growing as well,” said Mike McGuire, research vice president at Gartner. “Music labels, artists, publishers and new distribution intermediaries are developing new business models to address consumers’ changing behavior.

“The music industry was the first media sector to feel the full impact of two major forces — the Internet and technology-empowered consumers. It has staggered through the first decade of the 21st century, and entered the second bedraggled financially and facing a powerful set of intermediaries, which are creating borderless global ecosystems that defy the industry’s previous notions of control and monetization. The primary stakeholders in the music industry are facing wrenching changes and a somewhat uncertain future. However, the next four to five years portend solid growth.”

In the past 10 years, CD sales, the largest revenue stream for the industry, have eroded, while the online music revenue share is rapidly increasing. Digital downloads and streaming music services — referred to as subscription services — are the clear drivers in the online music industry for the coming years. Gartner estimates that subscription services will account for nearly one-third (29 percent) of end-user online music spending in 2015 (see Table 1).

Table 1. Online Music End-User Spending by Type of Service, Worldwide, 2008-2015 (Millions of Dollars)

	2011	2012	2015
Subscription Services	532.1	808.9	2,218.4
Download Services	3,629.8	3,847.4	4,050.3
Personalization Services	2,172.8	2,141.2	1,460.9
Total	6,334.7	6,797.6	7,729.6

Source: Gartner (October 2011)

As the shift from physical to digital music content quickens across the world, different regions are at different stages. Online music in North America is maturing, so the double-digit growth rates will be harder to maintain, and analysts expect to see solid, but flat, growth over the next five years. Western Europe, Asia/Pacific and Japan will see similar growth, while the highest growth rates will be in regions such as Latin America and the Middle East and Africa, which have not historically been strong markets for paying for tracks or albums from online services or stores.

As online distribution revenue starts to overtake physical revenue, which will happen beyond Gartner’s forecast to 2015, Gartner analysts said stakeholders in the music industry will continue to realign their businesses to maintain their places in the value chain. Consumers are likely to continue to take advantage of the applications, devices and services that provide them with multiple ways of discovering, consuming and communicating about music. As more music-related transactions, such as concert ticket sales and merchandise, have moved online, online music services, downloads or subscription services will have to find ways to make those related transactions available to their customers.

Mr. McGuire said the key issue that will affect the fortunes of many stakeholders in the music industry is how each sector addresses consumer data (specifically their behavior patterns), and how consumers find and share data about music and information. This issue will likely remain a point of contention among labels and artists and the online music services. Stakeholders will need to agree to broadly beneficial standards, such as extensions of OpenID, to minimize the number of times a consumer has to proffer an ID/password for multiple social media tools.

“For music labels, artists and publishers, challenges abound,” Mr. McGuire said. “However, there remain real opportunities to reinvent the business based on consumers who are adopting connected devices and who are showing they will pay for content in multiple ways. These sorts of changes offer the potential for many new types of service and business models aimed at allowing music fans to manage and access their music libraries while also integrating social media and content payment options.

“In particular, communications service providers (CSPs) should focus business development investigations into the potential for providing managed services options — such as cloud storage — as part of their consumer-facing services. However, CSPs must balance these potential opportunities with a careful examination of how any deployment addresses consumer concerns over privacy and ‘net neutrality’ issues,” said Stephanie Baghdassarian, research director at Gartner.

Additional information is available in the Gartner report “Media IAS Online Music Forecast, 2011-2015: Social Media, Subscriptions and the Cloud” at http://www.gartner.com/resId=1794215.