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Business News (more headlines) 05-19-2004

More CD Buyers Try Legal Digital Music Services, NPD Finds

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According to the latest data from The NPD Group, an increasing number of CD buyers are also purchasing from legal digital music download services, such as iTunes, Buy.com and others. Legal digital music services also appear to attract consumers who tend to purchase more CDs than the average consumer. This comes at a time when fewer of these consumers are using peer-to-peer (P2P) services to share music files illegally.

Just under five percent of CD buyers reported using a legal service to purchase music during the first quarter of 2004, which is nearly three times the level NPD observed among music buyers during the same period in 2003 (1.7 percent). Among music buyers who purchased both physical CDs and a song download from a legal service, the likelihood that they also downloaded a song illegally fell dramatically, from 64 percent last year to 42 percent in 2004.

Who's jumping on the legal download bandwagon?

Consumers who downloaded from a legal service or became paid members of subscription services showed only a slight reduction in the number of CDs that they purchased at retail. The average consumer who paid for digital music as well as CDs purchased less than one fewer CD in 2003 compared to 2002.

"Paid services like iTunes and Rhapsody appear to be attracting core music buyers, which can create a firm foundation for legal digital music purchases," said Russ Crupnick, president of NPD Music. "To date, NPD data shows that there has been a small reduction in sales of CDs; however, that decline might be offset by the overall value of the digital customer and the downturn in illegal file sharing."

According to NPD there were other notable differences in CD purchase behavior, depending on how consumers used specific online music services. CD buyers who also used an online music subscription service, such as Rhapsody, in the past twelve months purchased an average of 11 CDs last year; those who had paid for a music download from legal download site, like iTunes, purchased 10 CDs; those who used a P2P file-sharing site purchased eight CDs; and those who did not download or stream music from the Web bought six CDs.

"Our research shows that it's the people who are really into music that are beginning to adopt paid digital services as an additional way of acquiring and enjoying music, and so far these services are living side by side with traditional CDs", Crupnick said. "As the industry matures and digital music becomes even more main stream, it remains to be seen just how much paid digital music will affect the market for CDs."

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