Will CDs and DVDs Disappear?

Market research firm Forrester Research claims that new distribution channels like the iTunes Music Store stand to completely replace physical media like CDs and DVDs. "The end of physical media is nearing," said the company.

A new report entitled "From Discs to Downloads" states that 20 percent of Americans participate in some form of music downloading activity, and half of those admit to buying fewer CDs. The report says that in five years' time, a third of all music sales will come from downloads, and video file sharing will increase as well.

Forrester expects that almost 15 percent of the movie rental business will come from on-demand movie services; as it stands now, 20 percent of "young file sharers" has already downloaded a feature film from online services.

Short Sighted?

Forrester principal analyst Josh Bernoff said that "a massive power shift in the entertainment industry" is coming.

"Entertainment executives focused on the short term--fighting piracy--are losing track of the long-term consequences. On-demand services are the future of entertainment delivery. CDs, DVDs, and any other forms of physical media will become obsolete," he said.

Forrester projects that music sales will increase by more than $500 million in 2004 thanks to emerging online music services, including the forthcoming Windows-compatible versions of Apple's hit ITunes Music Store.

Moving to Movies

Thanks to the machinations of the RIAA and high-profile news involving litigation and other issues, music piracy has a lot of mindshare, but Forrester notes that movie piracy is increasing too. "... the film industry's problems lag the music industry by three years," said the company.

Forrester sees on-demand movie distribution generating $1.4 billion in revenue by 2005, with DVD and video tape revenue declining by 8 percent by then.

Bernoff sees increased broadband adoption and cheap storage as factors that will push movie downloads in the same way that music downloads are now becoming popular.

The report draws on survey results culled from 4,782 adults and 1,170 young people between the ages of 12 and 22 (which Forrester said are the most active users of file-sharing software).