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Declining Music Sales: It's Not All Digital Downloading, Says The NPD Group
PORT WASHINGTON, NEW YORK, June 5, 2003 - Recent consumer-tracking surveys from The NPD Group suggest that the music industry and retailers must look beyond music file sharing to find other important root causes of ongoing music sales declines - especially among mature music buyers. According to data from NPD, consumers across all demographics are purchasing less music now than in the past two years. Total full-length CD sales were down 13 percent Q4 2002 compared to Q4 2001. Already this year Q1 unit sales trended downward by 9 percent. More than half of lost music sales can be attributed to file sharing; however, 60 percent of music consumers with access to the Web have not downloaded any music for free, and sales to those customers are off by as much as 7 percent. "Without a doubt, file sharing has had huge negative impact on music industry sales," said Russ Crupnick, vice president of The NPD Group. "But our research shows that even if digital file sharing were to disappear tomorrow, the record labels and retailers would still need to overcome important underlying causes of recent market declines." Listening to the mature music buyer While there are many root causes for lost sales, one important view is uncovered by looking deeper into the demographic segments of music buyers. NPD research shows steeper sales declines among consumers aged 36 and over, than among younger demographic groups. Nearly half of these adult consumers report they are purchasing less music, because there's less music they're interested in buying. Plus, fewer than 10 percent of this age group report purchasing less music because of downloading. "It's important to note that this group of mature consumers represents 45 percent of all CD sales," Crupnick said, "and near-term population growth trends should stand as a warning to the industry to reach out to older buyers, because the core teen and college market population is not expected to grow over the next five years." "Often the older consumer is looking for deep catalog titles by artists like Paul McCartney, Bruce Springsteen, Santana and the Rolling Stones," Crupnick continued. "But with growing consolidation within the retail market - and the rise of mass merchandisers in the place of failing independent music sellers - there's less chance the stores they shop will carry the types of music they're looking to buy." Industry Prescriptions When reviewing the needs of an older demographic segment, several possible prescriptions for dwindling sales present themselves. Among them are the following: 1. Focus on the revival of legacy artists - Recent music industry sales successes of CD compilations by older artists (e.g., The Beatles "One" and Pink Floyd "Echoes") illustrate that mature buyers will still purchase music when it fits their taste. "There remains a big opportunity for additional sales of legacy artists among older consumers," said Crupnick. 2. Create specialized sections for adult consumers - As consumers get older, they are less likely to be influenced by radio and more likely to be influenced by finding a record while browsing. In fact, just over a quarter of people age 35 or older report purchasing a CD after hearing a single on the radio, versus more than half of teens. Said Crupnick, "music merchandisers need to look at each segment of their consumer base separately and, when possible, cater to the way they shop. Point-of-purchase me rchandising and sales incentives targeted toward older consumers might also help increase sales." 3. Leverage targeted marketing - Advertising influenced purchases of music among 12 percent of teens (age 13 to 17), but the same can be said for only 4 percent of music buyers over the age of 36. Said Crupnick, "Whether this finding implies that younger people are more susceptible to advertising than mature consumers can be debated; but it makes sense for record labels and retailers to revisit marketing and advertising plans, to reach the eyes and ears of older consumers." About NPD Music NPD Music, a division of The NPD Group, provides reliable in-depth perspective on the most important issues facing today's music industry. NPD MusicWatch is the flagship information service from NPD Music that reports on what consumers buy, as well as where -- and why. MusicWatch provides a detailed look at today's music consumers, covering such critical issues as consumers' habits related to downloading music and burning CDs, key influences on music purchases and customer viewpoints on specific retailers. MusicWatch provides the actionable consumer information needed to understand today's music marketplace and discover where music consumers are today - and where they'll be tomorrow.
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