Wednesday, February 27, 2008

Falling CD Sales, P2P Sites Still Plague Music Industry

A new study conducted by The NPD Group confirms that CD sales continue to fall, and peer-to-peer download Websites remain a problem for the music industry's profitability and sustainability. According to the research group, U.S. consumers acquired 6% more music in 2007, but music spending overall was down by 10%, from US$44 per capita to US$40.

Why? Even though the number of Internet users that engage in P2P downloading remained flat at 19%, the number of files each person downloaded went up. What's more, the habit is becoming increasingly popular among the teen and "tween" crowd.

Making the situation even worse, NPD says that approx. one million customers completely stayed away from buying physical CDs in 2007. Almost half (48%) of teenagers said they did not buy one CD throughout the entire year!

Despite the grim outlook, there is a small silver lining. NPD reports that legal music downloads were up 5% when compared to 2006, representing 10% of music sold in 2007, with 29 million U.S. customers having obtained their digital tunes legally. Not surprisingly, Apple's iTunes service led the pack. But what is somewhat surprising is that iTunes was the second most popular spot to obtain music overall, overcome by only Wal-Mart!

If that isn't a clear indication of the direction the market is going, I don't know what is. The world's largest retailer sold the most music, which makes perfect sense. But to say that a digital download service rather than a traditional retailer came in second is an incredible achievement.

Now that the mistake-that-is DRM restrictions is slowly fading to oblivion, we might see interest in legal download sites rise this year. If the industry stops trying to find bundles and wonky subscription rates/plans and just focuses on giving customers tunes they want for a set price (either individually or by album), this would be a good start. Buying music digitally should be just as easy as it is to buy a physical CD. I just want to buy good quality tunes that I can play anywhere I want. No bells, no whistles, and no restrictions.


Jim said...

Not surprised, in my late teens and early 20's Saturday was set aside to go music hunting for rare and interesting CD's at bargain prices all around the city of Toronto (the old Sam's, A & A, Music World and the scattered used stores. It was always a treat to have something only a few had, too appreciated. Unfortunately I moved on since but the generation behind me has resorted portable and any piece of music is readily available at their finger tips, no leg work involved no appreciation or involvement. It doesn't help that the new talent with a few exceptions their full CD's are filler with one or two good songs at best, whatever happen to albums/CD's that you could listen all the way through and only picking one song was an injustice to the artist.

Anonymous said...

The Music industry continues to cry the blues yet will not accept some simple facts. The disposable income spent in the 80s/90s on CD is now challenged by the two most explosive medias in the past decade, DVD and Gaming. So if you allowed yourself to buy 3 CDS a month back in the day, you now buy 2 DVDs or one game. Same money spent elsewhere! All this blame on P2P is hogwash, it is a factor certainly but the lack of true music talent may have something to do with it also. To the music industry, change your business and istribution model and create some exctemet to compete in the media space that is music, movies and gaming! FL

Lee_D said...

Giving advice to the music industry feel like talking to the wall.

Henceforth I will now bill the RIAA for a "consulting service" every time I bitch about them on my blog.