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NARM Report Offers Hope For Packaged Entertainment

16 Mar, 2006 By: Jessica Wolf

The National Association of Recording Merchandisers (NARM) is looking to build an arsenal of information for retailers and suppliers in an increasingly tough packaged- entertainment market.

The trade group launched the first of a series of reports on the music consumer it has commissioned from research firm The NPD Group, this one focusing on buying habits of physical goods like CD, DualDisc, CD/DVD combos and DVD. The report surveyed 3,700 respondents.

A report diving into the mind of the digital consumer will come out in May, and a few months after that comes a separate study all about Baby Boomers and their music purchasing habits, said Jim Donio, president of NARM.

It's a tough retail world to be in, but it isn't all doom and gloom, Donio said. Nearly 94 percent of all music purchases last year came from sales of physical product, even in the face of peer-to-peer (P2P) file sharing and legal downloading.

Overall, according to the report, physical-music buyers spend $58 per year on CDs or other packaged-music product. These same buyers also spend $87 on DVD in a year and $97 on video games.

The heaviest music purchasers are also the biggest spenders in the other categories — shelling out $92 in a year for music, $106 for DVDs and $101 on games.

The consumer is still interested in collecting and still interested in interacting with music and entertainment on a physical level, Donio said. The market just has to find better ways to tap into that interest, both before the shopper leaves the house and once they are in the store, he said.

According to the report, 58% of the music consumers surveyed rated DVD as an excellent or very good value proposition. Their perceived value of music product — CDs, DualDisc, CD/DVD combos — is nearly as high, at 54%, according to the report.

Meanwhile, like the video market, increases in market share from mass merchants, discounters and online sources have chipped away at pure-play record stores.

Only 19.8% of music consumers shopped for music at these kinds of retailers in 2005, down from 20.4% in 2004 and 27.9% in 2002.

Consumers feel they get the best value by shopping online, with 75% rating online experiences as excellent or very good.

One of the most interesting and surprising things to come from the report, Donio said, is that consumers said they are getting their inspiration for music purchases from a myriad of sources.

The conventional assumption is that radio airplay is the most important element for music discovery, and while it remains a strong part, it is not the main driver anymore, Donio said.

The report showed that music buyers are more now than ever piqued by music they hear on TV shows, in movies and through Internet sites like Myspace.com, Donio said.

Indeed, according to the study, 37% of respondents said they would be likely to spend more on packaged goods than they did the previous year if they had the option of buying a movie soundtrack packaged with a DVD; 29% percent said they would spend more with DualDisc options available; 25% said that CD-DVD combo packages would pique their spending; and 19% said a TV DVD set with an included soundtrack would inspire them to part with more dollars.

Another striking element of the report, Donio said, was that the teen market actually increased its packaged music purchases last year. That segment increased physical purchases by 5%.

“The assumption has been that all the teens are completely downloading and not buying any physical product, and that just isn't entirely true,” Donio said. “They still have a really strong attachment to the physical product. Kids are collectors. I think we've perhaps glossed over of lost some of that zeal in our embracing of the digital market.”

It's the baby boomers whose purchases have dropped the most, the report found, which is why an upcoming report will focus solely on that consumer segment, Donio said.

NARM will release the three reports before its annual convention this summer in Florida and use the confab to reiterate the findings.

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