The CD has reached its 20th anniversary with style as it stands shoulders and head higher than its closest competitors. Over the years it has grown to become ubiquitous across the globe, with the majority of homes having at least one player and often more. There has been competition, but nothing that has made the CD industry quake in its boots – fads have come and gone and the CD still stands strong.

But what of the future? Will the CD still be in the number one slot another twenty years down the line? No one can tell what will happen, however analysts can give us some ideas of what may be ahead.

Looking forward at the next 20 years, opinions are very mixed as to where CD will stand, how important it will be, and even if it will still be around! Take for example Tony Crabtree, principal analysts at Juniper Research. “The need for CD will become irrelevant over the next five to 10 years,” he said.

Many do believe that it will soon begin to face strong competition, but that it will either overcome, or slowly dwindle, rather than disappear. “The demise of the CD is going to be a lot slower than a lot of people are predicting,” said Keith Jopling, director of market research at the IFPI.  “In fact I think the pace has changed in the industry. In terms of the overall shape of the industry, things are sometimes over exaggerated. I know we’ve got digital revolution and all that sort of thing, and CD has come into some really hot competition from DVD, but I think there’s a couple of things that will make the slowdown of CD’s a gradual thing. If you’re talking over a 20-year period I think what will happen is there’ll be a gradual decline. That might be anything from two or three per cent a year of CD sales going down. I think the slowdown we’ve seen over the past 18 months / two-year period is very quick and that’s just because we are in a transition, but I think it will slow down.”

David Sidebottom, * at Understanding and Solutions has similar thoughts on the future of CD. “20 years is a long time ahead, but we think CD is going to be the dominant music platform for the next two, and maybe for the next 20 years as well. There’s nothing else competition-wise really.  There is DVD and SA-CD coming up, but we are led to believe that they are going to be about five per cent of the overall market by 2006 / 2007 if that,” he said.  “Basically the penetration of CD players is so high that it’s going to take a long time for CD sales to dwindle. We believe that there will be some recovery for the next few years and it will remain dominant for the foreseeable future, so that’s probably the key message that we want to get across, that there’s no format out there at the moment that is ready to compete with CD sales, for the mass market anyway,” Sidebottom added.

So CD looks set to be around for quite a while yet, but it is inconclusive as to how long and how strong. No one can stop things from moving forward, however the CD has worldwide proliferation, and consumer’s minds will have to be changed before the CD, as we know it, will disappear.  This doesn’t stop manufacturers from trying to create the next step forward in CD. Bertlesmann, for example, have created the flexCD, which it calls the world’s first physically flexible CD. “The FlexCD can be inserted into magazines or wrapped around a soda can like a sticker,” said Erik Hunter, head of marketing for flexCD at a Bertlesmann subsidiary called Flexstorm. The company claims it will not complete with traditional stiff CDs for recorded music, but aims to make rapid inroads into the business of promotional giveaway CDs. The production costs of the flexCD are less than half of those of a hard CD, and the disks cost less to fold into a magazine, making them ideal for direct marketing.

Competition for conventional CDs are hotting up however, and many areas are looking to take sales away from today’s main media. DVD-Audio, SA-CD and Internet all look set to vie for the title of sales leader in the future.

“I think that the key way in which industry is going to change, is through the introduction of meaningful competition from Internet delivery,” said Chris Tant, managing analyst of the interactive television (iTV) research program at Datamonitor. He also has a large interest in the music arena. “I think that’s going to lead to a more fundamental change than from DVD-audio, but it’s still going to be a very gradual process in the main part. It does utterly depend on broadband uptake, and I think people are and most people will remain fairly keen on physical media, which means keeping CD libraries.”

This is not true of all groups, and Tant believes there is a generational difference, as children who have grown up with the Internet look on that as the first place of choice to get audio.

“Current late teens or early twenties in the States, might well have been used to all of all of their time as consumers downloading music and storing it on PCs,” noted Tant. “ I have heard for instance of it not being unusual for kids at colleges in the States where they have broadband access to every room, not owning a single CD and their entire music collection actually being mp3’s. I think that’s got to be pretty rare, especially over here. I think that the CD market will keep going for the time being and that gradually it will make way to Internet distribution and that will happen with certain genres of music, particularly music that is targeted at a younger audience that would more rapidly move over to internet distribution as being the primary area.”

“We do think there will be a place for electronic distribution, but more in the medium to long term – 2004-2005. Certainly in the medium term anyway it’s going to complement CD sales. So the services will be set up in such a way that they’re not like the CD sales, they’re providing an extra value service,” said Sidebottom.

Electronic delivery might in the long term, say 2008 and onwards, begin to substitute CD sales as services become more sophisticated and become easier to use.  The install base of mp3 players etc in cars and hi-fi systems will increase as well, but it’s long term before it becomes mass market and starts hurting CD’s. Until at least 2010, CD is going to be the dominant music format,” he added.

Internet distribution does have some barriers to beat. Illegal sites and piracy issues, interoperability and a small, but growing, penetration base. This will change over time, sure, but to the extent that it will really affect CD sales? “I think online is definitely going to be big, I know it taken a while to get off the ground and we’ve got the piracy issues, we’ve got the interoperability issues, and all the licensing issues, so it’s a very difficult market to launch, but there’s at least a dozen key launches that have happened over the past six to 12 months that say to me it is starting to come along; legitimate services for people to download music,” said Jopling.

 “I mean they don’t have the depth or breadth of catalogue that some of the pirate services do, but I think that as the IFPI is having success in taking those pirate services down, we’ll see the legitimate services grow.  I think that the number one new channel opportunity is downloads, and it’s a combination if downloads and subscription services, no one knows what kind of mix of market share those two will have. Basically the bottom line is downloads will be popular and all the research evidence that has been out there for the past few years when people have asked consumers what they think of online music, there’s a potential for them to pay for it. What they want is a better service that’s quicker, legitimate, exciting - and I think they’re going to get that eventually –I think over the next 5 or 10 years you might see downloads grow to a significant chunk of the market, and I’m talking anywhere between 15-25 per cent of the market. You cant even put a percentage on it the moment.”

Many analysts back up that quicker, simpler, real-time exchanging of music could be the way of the future. Take for example Neil Mawston, senior analyst, global wireless practice at Strategy Analytics. “I would suggest that peer-to-peer music swapping has good potential over the next 20 years, subject to cost, billing, legal, governmental, DRM and bandwidth issues,” he said. “I would also suggest that any simplified process which reduces delivery times and lead-times, such as downloading music over the fixed or mobile web rather than trudging to the shops, and hence cost, will, all things being equal, likely gain market share.”

The CD and CD-Rom markets for games in not being left unscathed. Already they are being invaded with a change to DVD for PC products.” Its both a protective measure as DVD writers are still (but not for long) expensive,” noted director general of the ELSPA, Roger Bennett. “The markets for all three will depend on the expansion of direct digital distribution, online and streaming. However, the bricks and mortar retail market has a very strong hold on distribution currently. The latter will continue to be an important access point, so long as consumers want to have something in their hand, even for accessing content online. It may take 20 years or more before breaking the physical delivery mould.”

“The foreseeable future certainly includes digital delivery, whether online, streaming and wireless. Again, there are no proven business models to adopt online yet, however Broadband roll-out will encourage the ‘fast forward’ process in encouraging publishers to adopt online delivery of great content, which should also deliver an increase of consumer demand. It will however be a lengthy process and there are major pitfalls, not least the rather large question of security,” he added.

There is other competition arising, however the Internet looks to be the closest contester to take the CD’s crown.  DVD-audio and the newly created SA-CD are looking to gain a market share, but it seems to most that they do not offer any extra benefits that would mean they were chosen over CD. It is true that DVD-audio can offer surround sound capabilities, but how many consumers currently have a system that will benefit from that, or are likely to get one in the future. You could even go so far as to say that the majority of consumers wouldn’t really be able to tell the difference. “DVD-audio provides this vastly greater sound quality, apparently, but hardly anyone can tell the difference and you’d probably have to have a several thousand pound hi-fi system to really notice it,” noted Tant. “So from that point of view if you are pushing DVD-audio because of its high sound quality, it will remain a very small market.”

“The difference between CD and audio cassette was vast,” explained Sidebottom, “ the step up in quality, convenience of use etc, but with CD we’ve got to this point where you say what else can you do to it to make it easier to use, or better quality, without a huge additional cost? With DVD-audio and SA-CD there will be some kind of market because of the few people really interested in the benefits of surround and higher quality CD’s - they will be the audiophiles.” There will be market, therefore, but perhaps not one to sustain a big fight against CD.

There are also other bonuses to using DVD-Audio, especially in terms of piracy. CD piracy preventors have many compatibility issues with existing stereos, whereas with DVD-audio a protection system will already be in place when it is widely released. “One of the reasons why you might see DVD-audio developing over time is because there is that copy protection system already in place,” said Caroline Baines, * at Understanding and Solutions. “Trying to put copy protection onto something which is used worldwide is incredibly difficult as you already have that huge install base of players, and trying then to have a system which gives you 90 per cent or 95 per cent plus compatibility on that huge range of players that are out there is a complete nightmare.”

In addition, you could look at DVD-audio with the idea of fitting more content onto a disc, but if you can comfortably fit an album length of music onto a CD, there isn’t really much of an advantage to being able to up four albums onto one disc. “People wont be willing to pay perhaps £40-50 for one disc. I still think that people will associate a lot of the cost with the disc rather than what’s on it. They wouldn’t pay twice as much for a disc with twice as much information on it, I think they’d typically prefer to buy two discs. Also if people are still keen on physical media they will still want something to fill the shelves up with,” said Tant.

“You’ve got the aesthetic thing, DVD’s look the same as CDs, most people on the street aren’t going to see the difference, and they’re really not going to want to buy a new device, and swap CD’s for DVD’s when as far as they are concerned its basically the same technology. I could be proven wrong, but I find it difficult to see DVD audio really taking off,” he added.

When it comes down to it, it is the consumers who decide where the market heads. Take-up is down to them, and their opinions and lifestyles can change the course of the industry.

Changing perceptions is hard to do, especially when something like CD is so well established. “People tend to buy CDs as a gift, and having something that is professionally packaged and have all the printed parts that go with it, is a bit different than something than something that has been burned onto CD-R or has been downloaded, so there’s always going to be that need,” noted Baines.  “People still like to have the ability to go out and chose things that look distinctive in record shops.”

Overall interest in music has changed with the times too. “I think in terms of lifestyle, consumers are spending less on music now than they were two or three years ago, because there’s so much else for them to spend their money on such as DVDs, cinema, mobile phones and games. While they’re doing that they’re not listening to music, they’re not going out and buying CDs. So there is a lot more competition for consumer’s time and money, which is a major influence as to why the music industry has declined in the last few years,” added Sidebottom.

“We’re being bombarded with a far greater choice than ever before in terms of media and I think that the amount of time people spend consuming media is increasing significantly, and that’s also something that in a way threatens the music industry,” agreed Tant. “As digital TV develops you’ve got far more channels than you ever had before and you also have the choice of a huge number of music channels, so I certainly noticed among my friends that people are watching television more and listening to music less than they used to. You’ve got another demands on time – the growth of games consoles, PC, internet, just the fact that I think people go out more than they used to and so all of those are factors that do present the music industry with challenges.”

Piracy is an aspect of music media that doesn’t look set to go away, however it’s strong hold on the industry looks set to weaken in a few years time. “They’ll never get rid of piracy,” stated Tant. “Ever since the audio cassette came out, piracy has been a fundamental aspect of the recording industry and it is a big problem at the moment. What’s essential is that the record companies get involved in Internet distribution and the way that you stamp out piracy is by providing a really good service with the right content at the right price and you make sure that its easier for people to find the content that they want that are high quality using official sites than it is to use peer to peer services etc. They are going to have to do that and I think they have accepted that now because they are certainly aren’t going to kill it through lawsuits and shutting down websites.”

“The fact is that so much of it is going over the Internet. Unless you have a global copy prosecution initiative you are really fighting a losing battle because if you copy protect Michael Jackson for example in the US and you don’t copy protect him in Australia, that open copy very quickly will become available on the Internet and people will copy it from there. So unless you have a global strategy, to some extent you are never going to overcome the problem,” noted Baines. “CD in a legitimate perspective is going to continue to suffer in many territories, in the short term at least, for the next one to two years,” she added.

Jopling also agrees with this point of view. “It will always be there,” he simply said. “So long as you’ve got a digital product it’s always going to be there. On CD, on DVD, and the Internet.

“It will always be there, but using technology to fight the piracy which essentially is what IFPI does, and offering something better than the pirate product and trying to keep one step ahead and bearing in mind most customers buy legitimate product, its still a minority of consumers that buy pirate product or download pirate product.  Most consumers are honest and they just enjoy the shopping experience anyway. Certainly in western markets, but I think piracy will always be there and I think for the next few years it’s going to be ever-present. It’s probably going to keep on eating into sales for another year or two,” he added.

“In theory they would struggle to offer now what record companies do. It’s still the best format for buying an album and the album is still the most logical format of listening to music. All that might change over a 20-year period but I think the change will be gradual. I also think the industry now is doing a few good things with CD, the thing that I’m excited about is the added value content on the CD. That’s things like the new Bon Jovi release where you get a pass word with the CD you can go on the website and get privileged access to concert tickets and extra tracks and things like that so the multimedia content that’s been put on CDs I think is going to make that an attractive product still for years to come”

Overall, the future of CD looks quite promising. It is true that the format will not be able to continue forever, however analysts feel that the end is not yet near. It will continue to be an integral part of the industry for many years to come, although perhaps from five years time and onwards its market share may be smaller due to the rise in legal Internet music sites and perhaps DVD-audio and SA-CD. We already know we can see the future through a crystal ball, but when everyone agrees the ‘end is not nigh’ then there’s a reason to celebrate the CD’s 20th anniversary with style, and even start making plans for it’s 25th, 30th and perhaps even 40th anniversaires.