The Australian paid music service provider (MSP) market is poised to explode over the next five years, fuelled in the short-termby the launch of Apple's iTunes Music Store and Yahoo's Music Unlimited.

According to research group IDC's latest digital home research, paid MSP revenue totalled $1.19 million in 2004, and will reach $52 million by 2009. The study, titled "Australia Paid Music Service Provider 2005-2009 Forecast and Analysis: Hot Pods and Cool Music", also finds that the timing of the entry of iTunes Music Store (iTMS) will have a significant impact on market growth in the short term. By the end of this year, total paid MSP revenue will increase by 203% if iTMS is launched before the end of the year, versus an increase of  152% if iTMS is launched in 2006.

"The growth is mainly attributed to the large installed base of iPods in Australia, and the media hype that will be generated by the entry of iTMS, stimulating overall interest in paid online music services," said Sophie Lo, IDC analyst for consumer digital markets.

"In the United States, paid MSP revenue went up by 381.7% in 2003, the year iTMS was launched, rising to US$224.0 million, up from US$46.5 million in 2002. We expect the Australian market to experience comparable market growth when iTMS is launched," said Lo.

IDC segments the paid MSP market to Internet-based pay-per-download service and Internet-based subscription service. IP-based pay-per-download service provides individual music tracks for download, such as BigPond Music and ninemsn.  IP-based subscription service includes portable subscription services, which allow the user to transfer an unlimited number of songs to compatible portable MP3 players, and access the music that they have downloaded as long as they are subscribing. To maintain access to music files, the portable MP3 player needs to be reconnected to the PC every 30 days to update the user's licence. IDC expects Yahoo to launch the first portable subscription service, Music Unlimited, in Australia.

The subscription model offers consumers access to thousands of tracks for transfer to portable devices without the expense of paying for each song individually or the inconvenience of taking that many tracks from CDs. Additionally, it offers paid MSPs the opportunity to earn higher annual revenue per user from recurring monthly subscription, thus expanding the paid MSP market.
 
By 2009, pay-per-download and subscription services are expected to contribute 75% and 25% of the total paid MSP revenue.