NUMBERS!

According to The NPD Group, a market research company for the entertainment industry, year-over-year consumer demand for music among Internet users in the US fell two percent in the third quarter of 2008. This overall decline in music acquisition includes purchased CDs, purchased digital music downloads, files obtained on peer-to-peer (P2P) file sharing Web sites, and borrowing music files to rip to a computer or burn to a CD.

The proportion of US Internet users, age 13 and older, purchasing a CD in the prior month fell from 25 percent in quarter three 2007 to 22 percent this year. NPD estimates that the volume of CDs purchased declined by 19 percent in Q3 compared to last year. The most dramatic declines in CD sales volume were among teens (down 34 percent) and among adults age 26 to 35 (down 36 percent). CD purchases by adults age 36 and older showed a more moderate decline of 10 percent.

Paid digital downloads experienced growth in the number of buyers, and the volume of tracks sold in Q3. Fifteen percent of Internet users purchased music from online music stores, such as iTunes and AmazonMP3, which is an increase of two percentage points over last year and equates to approximately 2.8 million additional music-download customers. Legal music download volumes increased by 29 percent in Q3 with positive numbers seen for all age groups except the 50-and-older segment, which represents a small portion of buyers.

“The continued growth in the customer base for paid digital downloads is positive, particularly for teens, but it’s counteracted by deepening softness in CD trends,” said Russ Crupnick, entertainment industry analyst for NPD. “Alternative distribution deals in mobile and social networking are important ways for the music industry to fill the gap left by the decline in traditional revenue streams.”

The number of Internet users sharing music on peer-to-peer (P2P) sites held steady at 14 percent in Q3 2008; however the volume of music shared via P2P sites rose by 23 percent, as P2P users reported downloading more files. Teens purchased 34 percent more paid digital downloads compared with year-ago, however growth in P2P file downloading was acute among 13 to 17-year-olds - up 46 percent. NPD noted that the practice of sharing files for the purpose of burning to a CD fell 25 percent among teens, which suggests an increased preference for having the files in a digital-only format.

“The industry has managed to constrain the number of people who are file sharing, but the expanded use of services such as Bit Torrent enable entrenched P2P users to download a growing number of files,” said Crupnick.

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