The decline in U.S. CD sales led to a decrease in overall music demand by 2 percent in the third quarter, according to the NPD Group.
The overall drop off in music purchases includes CDs, digital music downloads, and P2P file sharing sites.
The amount of U.S. Internet users, age 13 and older, purchasing a CD in the prior month fell from 25 percent in Q3 2007 to 22 percent this year. NPD estimates that the volume of CDs purchased fell by 19 percent in Q3 compared to last year. The most significant declines in CD sales were among teens (down 34%) and among adults age 26 to 35 (down 36%). CD purchases by adults age 36 and older were more moderate with a 10 percent decline.
Digital downloads saw growth in the number of buyers, and the volume of songs sold in Q3. Fifteen percent of Internet users purchased music from online music stores, such as iTunes and AmazonMP3, which is an increase of 2 percent over last year and is about 2.8 million additional music -download customers. Legal music downloads were up 29 percent in Q3 with positive number for all age groups except those 50 and older.
“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 P2P sites remained steady at 14 percent in Q3, but the volume of music shared via P2P sites increased by 23 percent, as P2P users reported downloading more files. Teens purchased 34 percent more digital downloads compared with last year.
“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.
Video gaming also has had a positive effect on the music industry. Twenty-two percent of music buyers and 35 percent of people under age 35 said they played a music-based video game, such as Rock Band or Guitar Hero, in the last three months. This has led to music gamers finding music and making digital or CD purchases.
“Even though gaming competes with music for the consumer’s entertainment wallet share, music-related games are evolving into an important source for music discovery that can have positive revenue implications for the recording industry,” Crupnick said.
