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Digital Downloading Must Be Viewed as a Growth Area for Record Companies

(CelebrityAccess MediaWire)

The promising success of legal digital music services, such as iTunes, as well as the outlook of newer types of music features, including ring-tones and ring-backs, represent both a growth area and challenge for the music industry, according to Shahid Khan, a managing director with the Media & Entertainment practice of BearingPoint, Inc., one of the world's largest business consulting and systems integration firms.

"The issue is essentially being forced on the music industry, both from a content owner's perspective, as well as from a new business venture's perspective," said Khan. "Ignoring or fighting these growth areas is no longer an option. Record companies must now transform themselves to take advantage of the market, or be left behind."

"For new business ventures, the opportunities for the industry are clear and diverse, especially in the infrastructure and support services areas," added Khan, a veteran of the business with more than 12 years of experience with such leading companies as Bertelsmann, Viacom and Scholastic. In addition, Khan led the activities of the various IBM Global Services groups focusing on Entertainment, Publishing and Information Services clients.

Khan explained his insights during the recent Billboard Music and Money Symposium, where he participated as a panelist for the "Investing in the Digital Future" discussion. The panel explored such growth areas in the music industry as digital downloads and ring tones, as well as the outlook for new ventures.

Khan said:

** "There is a limited room for "me-too" models, and new ventures must
demonstrate the potential for both profitability and survivability, as
well as innovation in business models and customer value propositions."

** "There will be future market opportunity for niche players and for
support services around these growth areas, such as end-to-end
operational infrastructure, including billing, digital rights
management, rights tracking, sales audit, and royalty reporting."

** "New ventures may come from new geographies, as consumer desires
globalize. However, disparate infrastructures may vary in different
geographies and impact the ability to support globalization."

** "Owners of intellectual property (publishers and recording companies)
need to re-orient their internal processes and systems from release
planning, product creation, contracts management, and royalty
distribution to be more agile in order to respond quickly and strongly
to market opportunities."

** "Rights acquisition — especially around future rights — in artist and
songwriter contracts will become a greater issue, as will a focus on the
elimination of specific approval clauses in licensed music."

** "Owners of intellectual property will need to focus on catalog depth
available by usage and by territory so that 'celestial jukebox' concerns
of labels and publishers are met."

–Jane Cohen and Bob Grossweiner