Study: Legal Downloads Were Fastest-Growing Digital Music Category In '06
March 14, 2007 at 10:06 AM (PT)
A new study from consumer and retail information company THE NPD GROUP shows that the recording industry registered solid growth of digital music sales in 2006 from services like iTUNES, but it continues to fight against serious challenges from music piracy in the form of peer-to-peer (P2P) file sharing.
"Legal a la carte downloads were the fastest growing digital music category in 2006, and it is likely that the annual number of legal users will surpass P2P users in 2007," said NPD GROUP VP and entertainment industry analyst RUSS CRUPNICK. "Unfortunately for music labels, the volume of music files purchased legally is swamped by the sheer volume of files being traded illegally, whether on P2P or burned CDs sourced from borrowed files."
Unfortunately for music labels, the volume of music files purchased legally is swamped by the sheer volume of files being traded illegally, whether on P2P or burned CDs sourced from borrowed files.
By the end of 2006, there were 47 million "digital music households" in the U.S. -- i.e., households with a member who downloaded, ripped, burned, played, or uploaded digital music. Among those households, 15 million actively downloaded at least one music file from a P2P site in 2006 -- an 8% increase over 2005, but still a slower growth rate than was noted in prior years. While P2P user growth rates slowed, the average P2P user downloaded many more files in 2006 (5 billion files) than the previous year, which represents a 47% increase in P2P downloading compared to 2005 (3.4 billion files).
"The slowdown in the growth rate in the number P2P users is somewhat remarkable given the growth in digital music users overall, the emergence of digital video, and the expanded consumer exposure to broadband," CRUPNICK noted. "Even so, 5 billion files downloaded illegally clearly affect prospects for both CD sales and sales of digital song tracks online."
While in 2005 NPD noted a two-to-one difference between the P2P and pay-to-download populations, in 2006 there were nearly 13 million households using a paid digital music download services -- almost three times more than NPD reported in 2004. Overall, the number of music files purchased in 2006 exceeded 500 million, which is a 56% increase from the previous year. "Paid usage is gaining on P2P; however P2P users tend to download many more files per user than do those consumers who pay for music downloads," said CRUPNICK.
He added, "More anti-piracy initiatives need to be crafted if there's any hope of reducing the amount of P2P file sharing and other piracy. Most of all, the recording industry should continue to nurture and support those who pay to download music in order to reinforce repeat usage and continue to build on take rates."